Wealthy investors are pulling back from the markets because they fear the global financial crisis may not be over.
Despite policy makers like Ben Bernanke of the US Federal Reserve hinting that an economic turnaround is just around the corner, investors are cautious about buying.
None out of 10 high-net worth investors – those with at least $1m in disposable cash – say they can see opportunities, but just over two-thirds believe the risk of price falls is too much of a clear and present danger to encourage them to buy.
Only 28% told Barclays Bank, which compiled the report, that they would increase their portfolios over the next 12 months.
“This caution is repeated worldwide by wealthy investors,” said a Barclays spokesman.
Straightforward investments
“These investors have seen the volatility in the markets and do not have the confidence to start buying again just yet.”
Most wealthy investors are simply playing a waiting game to see how the world economy pans out, said the bank.
They understand that policy-makers are talking up the prospects of recovery, but 58% confirmed they will make no changes to domestic stocks, while 65% will not alter their exposure to hedge funds.
The bank argues that wealthy investors do not want to move in case they regret making changes.
“Most feel they want more information. They want simple decisions and no complications. More than 50% said they will only invest in markets they know and understand,” said a spokesman.
Fear of risk
Investors that are buying are sticking to simple purchases, like property, cash and government bonds because they feel these offer less risk and greater security.
“They perceive complicated financial products played a major role in undermining the markets in the lead up to global recession and the banking crisis,” said the spokesman. “They do not want to get involved in the same problems again.
“Mistrust and concern over how central banks and governments handled the crisis are key factors in why the wealthy are not investing,” said the spokesman.
The report revealed investors from India, Spain and Hong Kong have poor opinions about how the financial crisis was managed, while only a third of wealthy investors in the US feel President Obama has come through the economic difficulties with credit.
Top of the agenda for many of the wealthy, says the bank, is the quality of information coming from financial providers that sets out clearly what risk and returns to expect.
About John Cassidy
