Majority of HNW investors more confident about Europe – JP Morgan Private Bank

Only 16% of investors are worried about a eurozone breakup compared with 36% in 2012, a private client survey by JP Morgan Private Bank revealed.

JP Morgan Private Bank has revealed the expectations of Ultra High Net Worth and High Net Worth investors across Europe on market conditions, risk appetite and investment sentiment for the next twelve months.

The study was conducted as part of the Private Bank’s recent Investment Insights series, (September to October 2013), held in 16 cities across Europe, with more than 600 UHNW and HNW investors.

When asked which asset class will outperform over the next 12 months, 48% of participants believe equities will outperform. Yet another 28%of those polled believe private equity to be the other asset class winner over the next year. The remaining 24% were split between hedge funds, commodities, high yield and core fixed income.

UHNW and HNW investors in Spain, the UK, France, and Switzerland were found to have the most optimistic outlook towards equity markets, with 70%, 57%, 48% and 47%, respectively, the study also revealed.

Fifty percent of investors polled believe that European markets will be the best equity market performer, in stark contrast with the same time last year when it was below 30%.

According to the current survey, the US is still thought to be a strong equity market to invest in next year (23%), too, particularly for UK investors (31%).

The survey also asked if investors’ sentiment towards investments in Europe had improved since the beginning of the year, and if investors had invested in the region as a result. More than 45% of investors have seen an improvement in Europe and as a result added European equities to their portfolios, with investors based in Munich (68%), Madrid (60%) and Hamburg (59%) having done so most aggressively.

A significant number of investors across Europe (19%) believe that all fixed income investments will have negative returns over the coming 12 months.

Cesar Perez, Chief Investment Strategist for JP Morgan Private Bank in EMEA, commented: “Investors are concerned after China’s growth slowdown this summer, which was driven by tightening in social funding. But China is now back on track to achieve 7 to 8%growth during the next couple of years, thanks to a recovery in economic activity in developed markets.”

He continued: “Investors believe equities will be the best performing asset class over the next twelve months. Historically equity markets have performed well in the early stages of rising rate environments, so we agree with investors and see potential for this asset class to outperform over the next year. We also believe the Euro area to be at the onset of an improvement in hard data, such as retail sales.

He concluded: “We are underweight fixed income investments. While we prefer extended credit to core fixed income, given low corporate default expectations and robust balance sheets with stronger cash positions, we are continuing the rotation we began last year out of high yield. So far, we have funded additions to equities and hedge funds.”


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