Major asset classes risky, say UK investors

British investors view all major asset classes bar commodities as riskier as a result of their experiences in the credit crunch, according to a study commissioned by Goldman Sachs Asset Management

The Vix index – widely held to be reflect investor nervousness – has more than halved from the multi-decade high of 45.5 it hit in October 2008.

But a majority of UK investors still feel bonds, property, private equity and hedge funds are either slightly, or much riskier investments than they used to be.

Some 45% believe shares are riskier.

For each asset class the study found more European than British respondents feel investing now entails greater risk.

Only commodities have not suffered in investors’ minds, with half the respondents saying their view on risk is unchanged while 19% believe commodities are less risky now.

The study, conducted on 289 wealthy investors – retail and institutional – by the Economist Intelligence Unit, revealed only 33% of British respondents said the crunch was worse than they could have imagined, or a once in a lifetime event. Some 31% of Europeans agreed.

Eight in every 10 Britons said their investments suffered much as they expected, or less, or were unaffected by the crunch. Some 56% of Continental Europeans agreed.

Monica Woodley, senior editor within the EIU’s business research division, said: “We were surprised by how many investors said that the volatility of the financial crisis was merely unusual, rather than once in a lifetime or beyond anything they could imagine, which is certainly how investors described it while in the throes of the crisis.

“However, the fact that they now feel individual asset classes are riskier shows that the crisis has had a long-term impact on perceptions. This may be a sign that investors now realise there are no ‘safe’ investments and avoiding certain asset classes does not avoid risk.”

The worst financial crisis since the Great Depression has left only 16% of UK investors and 13% of European unable to achieve some of their personal goals.

However, their broad acceptance of investment risk did not mean investors did not react to it during the crisis, and most Britons and Europeans said they de-risked their allocations during the crunch.

Half of each investor group added the designation of investment strategies as low or high risk needs reviewing since the crisis.

David Walker

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