The annual study of 22,000 global investors, of which more than 1,000 were UK-based, found that 58% of UK investors expect to make an average return of up to 10% over the next five years, while 31% expect a minimum of 10% per year.
Global investors meanwhile were even more optimistic, expecting a 10.2% return over the next five years, while European investors fell in line with the UK at 8.7%.
Yet despite these high expectations, the study also found that UK investors are currently averse to taking too much risk, owing to the uncertainty caused by international politics and world events.
As a result, 48% of those UK investors surveyed said they were keeping more of their money in cash than before, while 59% said they do not want to take on as much investment risk right now.
Expectations versus reality
According to Schroders, historic performance for equities has been lower than the expectations expressed by investors in past studies. For example, the MSCI World Index, with dividend income reinvested, has provided annual returns of 7.2% over the last three decades.
Instead, the Schroders Economics Group has forecast a 5.4% annual return for UK equities over the next seven years, or 2.4% a year after inflation is taken into account.
“Investors’ expectations for returns of nearly 9% over the next five years look very optimistic,” said James Rainbow, co-head of Schroders UK intermediary business.
“The UK stock market has seen a remarkable rally in recent years, which has probably buoyed confidence. But much of the strong performance is due to the extreme actions taken by central banks to stimulate the economy. The broader picture is that we’re in an age of low rates and low growth. It’s therefore wise to expect lower returns.”