Emerging markets to top performance charts, predict investors

The majority of UK investors believe that emerging markets will continue to be the best performing equity market region over the coming years, according to major consumer research conducted by Ignis Asset Management. Yet alarmingly, a third of investors in the survey admit to having no emerging market exposure at all, while 72% have less than 10% exposure to the sector.

The survey, which sought the views of 521 investors throughout September, reveals that emerging markets is expected to be the best performing equity market region in both the short and the long term. Forty-one per cent of respondents believe emerging markets, including the BRIC countries, will outperform all others in the next three years - more than three times the number of investors who believe Asia Pacific, in second place, will be the best performing equity market. Over 10 years investors are even more convinced of emerging markets' supremacy, with 45% saying EMs will outstrip all other markets over the period, far ahead of Asia Pacific (10%), the US (6%), Europe ex UK (4%), the UK (2%) and Japan (1%).

The results confirm that emerging markets are, by a considerable margin, the preferred investment region of both investors and financial advisers. A recent Ignis Asset Management survey of 180 IFAs also found a strong preference for emerging markets, with 83% of advisers saying that greater exposure to the sector will play a key role in closing pension deficits in the years ahead.

However, the consumer research reveals that, when it comes to their exposure to the UK stock market, investors and advisers hold very different views. While more than two-thirds of investors (69%) believe they are either correctly exposed or underexposed to UK equities, an overwhelming majority of advisers (89%) believe UK investors are in fact overexposed to the domestic market.

Jonathan Polin, director, Ignis Asset Management, says: "Retail investors are often assumed to be behind the curve when it comes to identifying sources of future outperformance but it is clear that, by strongly tipping emerging markets, they are entirely in step with most investment professionals. This makes it all the more puzzling that such a high number of investors have inadequate exposure to the sector, although the survey suggests this anomaly could be about to change.

"What is arguably more disturbing is that so many investors believe their exposure to UK equities is either fine or, in some cases, too low. When nine in 10 advisers hold the opposite view, it is clear that there is a serious problem which needs to be addressed sooner rather than later."

The research, conducted throughout September, surveyed 521 UK investors and asked them for their views on general investment confidence, the extent of appeal for specific asset classes, their portfolio bias and their preferred method of conducting their investment business.