Fundamental change in investor attitudes

A fundamental change has occurred in investor attitudes with most now opting against chasing the highest potential returns and preferring to focus on mitigating risk, according to new research released this week.

The research, commissioned by Principal Global Investors and conducted by CREATE-Research, pointed to what it described as "a fundamental shift in the mind-set of investors".

"The priority for investors is now focused on adopting goal-oriented approaches that mitigate unrewarded risk, rather than chasing the highest potential returns," it said. "As markets continue to defy previously held investment logic, investors understandably remain cautious. This has led to an increased demand for strategies tailored to take account of investor concerns and minimise unrewarded risk exposure. "

The analysis said the shift, a by-product of a sustained low rate environment, marked "a fundamental change in investor attitudes rather than a short-term trend".

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Commenting on the research findings, Principal Global Investors Australia chief executive, Grant Forster said the financial crisis had taught investors a number of lessons, but a key takeaway for all was greater caution.

"Investors have become more risk-aware and more agile than ever before. In 2013, the quest for yield was evident. In 2014, as caution has become more embedded in the investor psyche, investors have recalibrated their return expectations," he said. "While the debate around active versus passive has been resurgent, the real focus of the industry should be on adapting investment solutions to the new goal-oriented and risk-adverse mind-set of investors worldwide. Customisation is the name of the game."