South African investors are feeling quite optimistic

 ·28 Nov 2023

South African wealth investors expect better returns than their global counterparts over the next 12 months.

This is according to the Schroders Global Investor Study 2023, which surveyed over 23,000 wealth investors from 33 locations, including 400 from South Africa.

Nearly 80% of investors said that we are witnessing a regime shift for policy and markets due to the high inflation and high interest rate environment.

Due to this, over half of all global respondents said that they are changing investment strategies. Although South African wealth investors are a little slower, they still plan to adjust their strategies.

South African respondents who said that they have “expert” investment knowledge were the quickest to adapt to the environment, with 60% having already changed their strategy.

Schroders said that South African investors also had a heightened interest in digital assets and cryptocurrency compared to global respondents.

Despite an extremely difficult environment, most investors globally remain optimistic, with almost 90% expecting returns to be identical to or higher than last year.

How people think their returns over the next 12 months will compare with the previous 12 months:

AnswerGlobalSouth Africa
Significantly higher  18%16%
No change 28% 19%
Lower    9%  15%
Significantly lower   1%2%
I don’t know   2%1%

This was especially the case for ‘expert’ investors, with only 4% expecting next year’s returns to be lower.

The majority of global investors expected annual returns of 11.5%, which is similar to last year.

South African investors were the most optimistic, with an expected annual return of 16.8% – far higher than the 9.46% annualised return of the MSCI World Index of global stocks between 1987 and September 2023.

“In an investment landscape being increasingly shaped by the ‘3Ds’ of deglobalisation, decarbonisation and demographics, investors are still getting used to the fact that higher inflation and higher interest rates are here to stay,” Johanna Kyrklund, Schroders’ Group CIO and Co-Head of Investment,” said.

“Every asset has had to reprice to compete with a yield on cash in the bank. Valuation matters once again. Compared to the last 15 years, you may now need to be more flexible and active in the way you invest. The results of the study show that some investors are adjusting quicker than others.”

Best investments

South African wealth investors are most attracted to real estate (75%). Global respondents were nearly 20% less likely to invest in real estate than South African respondents.

This is followed by private equity and infrastructure and renewable energy (both 64%)

Investor’s top choice of private asset if they could invest:

Asset classGlobalSouth Africa
Private equity59%64%
Real estate  58%75%
Infrastructure and renewable energy  68%64%
Insurance-linked securities   45%42%
Microfinance and investment that aim to help society or sustainability28%23%
Private debt (loans to companies)  19%25%

In addition, investors are increasingly attracted to sustainable investment due to the positive environmental impact, and its impact aligns with their social principles

Whether people are attracted to sustainable funds and why:   

AnswerSouth Africa Global
Yes, because of the wider environmental impact 57%55%
Yes, because of my societal principles37%42%
Yes, because they are more likely to offer higher returns36%34%
No, because they won’t offer higher returns4%6%
No, because they don’t align with my principles         1%2%

On average, the proportion of investors ignoring the concerns has declined by half compared to last year’s survey, with 36% seeing sustainable funds as offering higher returns.

Active ownership – engaging with companies directly to improve business outcomes – is key for sustainable investing, and 79% of South African investors are more confident than their global counterparts in the long-term value creation of sustainable funds.

“This year’s results underline the widespread and growing recognition of the importance of active ownership to sustainable investment,” Andy Howard, Schroders’ Global Head of Sustainable Investment, said.

“Companies across industries face a wide range of challenges and opportunities, and intensifying pressures to adapt and evolve.”

Read: The end of medical aid in South Africa – businesses warn government of a big fight ahead

Show comments
Subscribe to our daily newsletter