Canadian Investors Emerge From COVID with Lofty Investment Return Expectations, Finds Natixis Survey

  • Canadian investors raise long-term investment return expectations to 11.2% above inflation, 120% higher than what financial advisors say they should expect
  • Pandemic stress-tested personal financial behavior; Investors learned lessons on spending, saving and making emotional investment decisions
  • Canadian investors’ top financial fears this year are a large, unexpected expense and the prospect of increased taxes; a slow economic recovery is their primary investment concern
  • Increased online, self-directed trading activity during the pandemic is led by Gen Y investors

Investors' and financial advisors' investment return expectations growing farther apart (Graphic: Business Wire)

BOSTON--()--A roller-coaster ride in the markets over the past year has only strengthened post-pandemic market expectations, with investors looking for 10.6% returns above inflation on their investments this year, on top of average reported gains of 11% in 2020, according to findings of a new survey of individual investors published today by Natixis Investment Managers (Natixis). In Canada, investors are emerging from COVID-19 with long-term return expectations that are 15% higher than before the pandemic began1 and two times more than the 5.1% returns financial professionals say is realistic.2

Natixis surveyed 300 investors in Canada who have at least $100,000 in household investable assets as part of a larger global survey conducted in March and April 2021 of 8,550 individual investors across 24 countries.

“In a prime example of recency bias, many investors seem to believe that if their investment portfolios did so well during the pandemic, they’ll do even better during the recovery,” said Dave Goodsell, Executive Director of Natixis Investment Managers’ Center for Investor Insight. “However, investors need to be emotionally equipped to withstand the higher levels of risk needed to pursue those outsized returns. The persistent fear of losses could test investor mettle when markets swing and require financial advisors to help clients keep their emotions in check and their expectations grounded in reality.”

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1
2019 Natixis Survey of Canadian Individual Investors found investors’ long-term annual return expectations were 9.7% above inflation
2 Natixis Investment Managers 2020 Global Financial Professionals Survey was conducted by CoreData Research between March 16 and April 24, 2020. In Canada, Natixis surveyed 150 financial advisors.

Return Expectations are Disconnected from Financial Fears

Outwardly, it would appear that Canadian investors have the mindset needed to pursue average annual returns of 11.2% over the long term. Nearly three-quarters (71%) recognize sudden market swings of 10% up or down as a normal occurrence, and 69% agree that volatility can create opportunities to grow wealth. Yet more than half (56%) say they aren’t comfortable taking risks to get ahead, and when push comes to shove, the vast majority (78%) would choose the safety of asset protection over investment performance.

Volatility ranked second only to a slower-than-expected economic recovery as Canadian investors’ biggest immediate investment concern. Meanwhile, when asked about their biggest financial fears this year, they put a large, unexpected expense at the top of the list, just ahead of the prospect of increased taxes.

The Effects of COVID-19 on Investors

The findings suggest that most Canadian respondents escaped the pandemic relatively unscathed. Nearly seven in 10 (69%) say they have experienced no negative health or financial impacts. Overall, fewer than 4% said they or a member of their household caught the virus. Nearly one in five (17%) reported a loss of household income, well below the global average of 25%. When asked to describe how they felt about their financial security during the pandemic, many Canadian investors say they feel fortunate (84%), resilient (76%) and confident (66%).

“While not the experience of all Canadians, the investors we surveyed fared better during the pandemic than those in most other countries in terms of employment and income,” said David Giunta, CEO for the US at Natixis Investment Managers. “Yet the long-tail physical, financial and fiscal effects of the pandemic are far-reaching and still unfolding, which creates both risks and opportunities. The big challenge for investors and those who advise them will be to position themselves for success and to remain resilient.”

Natixis found a mix of emotions among Canadian investors depending on their circumstances during the pandemic. Nearly four in 10 (36%) say they are stressed about their financial security. One in three have felt vulnerable (35%), even fearful (34%).

From a generational perspective, the Canadian findings generally follow those of the respondents surveyed in North America. Across the region, Generations X and Y investors were two times more likely than Baby Boomers to say the pandemic significantly set them back financially (22% of Gen Y and 25% of Gen X vs. 10% of Baby Boomers). Nearly 10% of both Generation Y and X investors were forced to take a withdrawal from their retirement plan vs. 3% of Baby Boomers.

Personal Finance Lessons Learned

COVID-19 stress-tested Canadian investors’ personal financial behaviors, and the experience was a lesson in fundamental spending, saving and investing principles, including the following:

  • Spending: 42% of investors say the pandemic convinced them of the importance of keeping their spending in check.
  • Saving: More than one in four (27%) investors say the pandemic taught them the importance of having an emergency savings account.
  • Planning: Nearly one in five (16%) investors say the experience of the pandemic taught them the importance of the role they play in their household’s entire financial picture. Nearly as many (14%) took away the need for proactive estate planning as a lesson learned.
  • Investing: After a year that saw both the swiftest market downturn and the swiftest recovery on record, nearly one in five (19%) investors say the pandemic taught them the importance of understanding risks in their portfolio. Slightly more (20%) learned they need to avoid making emotional investment decisions.

Overall, 42% of Canadian investors made changes in their investing accounts as a result of the pandemic, including 15% who say they invested more money. Others made withdrawals from savings and investment accounts (11%) or decreased retirement plan contributions (6%). Roughly 15% of investors increased trading activity because of the pandemic, a period during which the popularity of day-trading rose sharply worldwide and meme stocks emerged as a phenomenon. Natixis found that both globally and regionally, trading activity was highest among Gen Y investors, with a notable percentage trading more on their own through online platforms versus through a financial advisor. Globally, 32% of Gen Y investors and 39% in North America increased their activity through online trading platforms.

The full report and charts are available at www.im.natixis.com/us/research/2021-natixis-global-survey-of-individual-investors.

Methodology

Natixis surveyed 8,550 individual investors globally, including 1,050 in North America and 300 in Canada, with the goal of understanding their views on the markets, investing and financial security. Each of the 8,550 respondents had minimum net investable assets of US $100,000 (or Purchase Price Parity [PPP] equivalent). The survey was conducted in March and April 2021 by the research firm CoreData.

About the Natixis Investment Institute

The Natixis Investment Institute applies Active Thinking® to critical issues shaping the investment landscape. A global effort, the Institute combines expertise in the areas of investor sentiment, macroeconomics, and portfolio construction within Natixis Investment Managers, along with the unique perspectives of our affiliated investment managers and experts outside the greater Natixis organization. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.

About Natixis Investment Managers

Natixis Investment Managers serves financial professionals with more insightful ways to construct portfolios. Powered by the expertise of more than 20 specialized investment managers globally, we apply Active Thinking® to deliver proactive solutions that help clients pursue better outcomes in all markets. Natixis Investment Managers ranks among the world’s largest asset management firms1 with more than $1.3 trillion assets under management2 (€1,152.8 billion).

Headquartered in Paris and Boston, Natixis Investment Managers is a subsidiary of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Investment Managers’ affiliated investment management firms include AEW; Alliance Entreprendre; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; Vega Investment Managers;4 and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions, and Natixis Advisors offers other investment services through its AIA and MPA division. Not all offerings available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.

Natixis Investment Managers’ distribution and service groups include Natixis Distribution, L.P., a limited purpose broker-dealer and the distributor of various U.S. registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.

1 Cerulli Quantitative Update: Global Markets 2020 ranked Natixis Investment Managers as the 17th largest asset manager in the world based on assets under management as of December 31, 2019.
2 Assets under management (“AUM”) as of March 31, 2021 is $1,354.8 billion. AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers. Excluding H2O Asset Management.
3 A brand of DNCA Finance.
4 A wholly-owned subsidiary of Natixis Wealth Management.

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Contacts

Media:
Natixis Investment Managers
Kelly Cameron
Tel: +1-617-449-2543
Kelly.Cameron@natixis.com

Contacts

Media:
Natixis Investment Managers
Kelly Cameron
Tel: +1-617-449-2543
Kelly.Cameron@natixis.com