Federated Investors: Investors Conflicted Over Low Returns

Federated Investors: Investors Conflicted Over Low Returns

Widespread optimism and an eagerness to take on more risk were evident from the Federated Investors’ annual Investor Mindset Survey. The firm found that investors are no longer willing to play defense and want to start increasing their exposure to equities and other assets that have the potential to bring higher returns than bonds.

Investors survey key findings

The survey of high-income investors found that people are ready to make a big shift into equities over the next year, following the strong growth of the S&P 500 (INDEXSP:.INX) this year. Interestingly, investors said that they wanted to buy equities because they wanted a steady income, but this didn’t translate directly to buying fixed-income products.

investors advisor income products

Klarman: Baupost’s Core Principles Have Helped The Fund Outperform

Seth KlarmanWhen Baupost, the $30 billion Boston-based hedge fund now managed by Seth Klarman, was founded in 1982, it was launched with a core set of aims. Q4 2021 hedge fund letters, conferences and more Established by Harvard professor William Poorvu and a group of four other founding families, including Klarman, the group aimed to compound Read More

Investors and financial advisors were both very optimistic about the economy, with advisors being slightly more bullish. Investors also described themselves as being relatively progressive, while their financial advisors described them as being risk averse. This disconnect, along with the slight difference in the level of optimism, means that advisors don’t think their clients are taking full advantage of the rebounding economy. We can expect those clients to be advised to take on even more risk than they are currently planning.

widespread optimism abt econ

Investment returns

Even though this contradicts wanting a steady return, investors noted that they were very concerned about having low returns next year (or, clients just want it all). In the long run, investors are confident that they will meet their goals, with only 7% of investors saying that they are concerned about retirement income goals, compared to 32% of advisors who think that their clients should be worried. Again, advisors seem to think that their clients should be taking on more risk and pushing for higher returns.

Altogether, this seems to paint a somewhat dangerous picture. Investors are eager to take on more risk, and their advisors are ready to egg them on even more, while lots of respected analysts say there are a dearth of attractive opportunities and that there is a real chance of backsliding once tapering finally kicks in. For anyone worried about a small equities bubble forming, the sentiment necessary to drive such a thing is certainly in place.

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