The return expectations of South African wealth investors* could be unrealistically high and, given the instability in local markets, could result in future disappointment, a study has found. 

The Schroders Global Investor Study 2017 – a survey of over 22 000 wealth investors* across 30 countries, conducted by global asset management firm Schroders – has revealed that, over the next five years, South African wealth investors* expect to receive an average annual total return of 13.3%, which is significantly higher than the global average return expectation of 10.2%.

Doug Abbott, the head of business development: South Africa at Schroders, says the FTSE/JSE All Share Index delivered only 2.6% in 2016.

“The study found that the average annual return expectation of South African wealth investors* (13.3%) was higher than the expectations of investors in many other countries, such as 8.7% in Europe, 11.7% in Asia and 11.7% in the Americas. A concern around this is that these high-return expectations may leave some South African wealth investors* disappointed, or result in them failing to meet their financial goals, such as saving for retirement.”

Interestingly, Abbott points out, South African wealth investors* did show quite a high degree of caution regarding how their investments could be affected by the geo-political landscape.

“When asked how the current uncertainty surrounding international politics and world events affected their investments, almost two-thirds (64%) of South African wealth investors* said they don't want to take on as much risk now and almost half (46%) said they are holding more money in cash now than before.

“However, almost as many (63%) felt that world events represented investment opportunities and half (49%) don't let politics and world events detract from their investment objectives,” he says.

While many South African wealth investors* may be overly optimistic with their return expectations, encouragingly, there is a strong desire to learn more about investing, says Abbott.

“The study showed that an overwhelming majority (91%) of South African investors want to improve their investment understanding, which would lead to more realistic expectations in terms of future investment returns.”

Abbott says there are various avenues available for investors seeking to improve their investment knowledge and understanding. “We encourage investors to speak with a financial adviser to plan based on their individual investment needs.”

* South African wealth investors: term given to the South African-specific research sample. This research defines "investors" as those who will invest at least R150 000 in the next 12 months and who have made changes to their investments within the past 10 years.