Income becomes a priority for global investors

Hong Kong individuals are among the world’s most international investors with a large number seeing their own city as a risky bet, a new survey shows.

In the global poll, more investors appear to be using their portfolios to generate income, and are even using returns to fund day-to-day spending.

And China tops the charts as the country where people are most likely to use their investment income to enjoy themselves on holiday or through luxury purchases.

A total of 90% of Hong Kong investors have international investments, according to an investment survey* conducted by Legg Mason Global Asset Management. The figure was the highest in the region and greater than the global figure of 77%. Amongst reasons for this, including an attempt to diversify among different markets, Hong Kong investors cited social unrest for their desire to invest internationally – the survey was conducted around the time of the Occupy Central protests in the city late last year.

In addition, almost half (46%) of Hong Kong investors ranked their own city/market as the riskiest place to invest compared to only 11% of global investors who shared this view of Hong Kong. China was ranked as the second-highest investment risk by 45% of Hong Kong investors.

A need for income was highlighted in the survey, with all of the Hong Kong investors surveyed having some income-producing assets in their portfolio. A total of 91% of the investors said that they would prioritise income-generating investments in 2015 as important or extremely important, mostly by investing in equity income funds, high-yield bonds and guaranteed income products.

When it came to how investors used their investment income last year, results differed across global markets. China topped the global poll when it came to “fun money”, with 85% of investors saying they used at least part of their investment income on pleasure, such as holidays and luxury purchases. In contrast, a mere 27% of Mexican investors said they spent the income on fun. Only 35% of Hong Kong investors used their money for fun. A surprisingly large 69% of investors across the world said they used some of their investment income on everyday expenses, while a mere 31% globally said they used it to support their elderly family.

Hong Kong investors’ investment expectations appear to be getting more realistic. Investors are seeking a lower average rate of return (7.8%) compared to the results (8.3%) of last year’s Legg Mason survey. Singapore investors have also lowered their expected average rate of return to 7.9% from the year before (8.5%).

However, Hong Kong investors are more pessimistic compared to their global peers. Only 65% of the investors are confident in their ability to manage their investments, as opposed to 86% globally. Similarly, only 64% of the city’s investors are confident of achieving their financial goals, compared to 84% globally.

“Income remains a key priority for many investors around the world,” said Matthew Schiffman, managing director at Legg Mason. “With investors in the region becoming more realistic about their expectations, we are pleased to see the gap close between their expectations and the income actually produced by their income-producing investments.”

*The Legg Mason Global Investment Survey interviewed 4,208 investors with a minimum of $200,000 in investable assets, not including their residence or holiday homes, from 20 countries/markets. The survey was conducted from November 19 to December 16 last year.