Markets can change, along with investment strategies and interest rates, but Italian HNWI investors’ preference for bonds remains undiminished, according to a survey conducted by Legg Mason Global Asset Management.
The survey, conducted among more than 5000 Italian HNWI investors aged 40 0r older, revealed that 27% of the average portfolio in this group was allocated to fixed income: this is the highest percentage globally, compared to 10% in Germany, 12% in France, 13% in the UK and China, 14% in Spain and 15% in the US.
The remainder of the average Italian HNWI’s portfolio is allocated to cash or cash equivalent (23%), equities (19%), investment real estate (16%), gold and precious metals (5%) and non-traditional investments (5%).
According to these Italian investors, the asset classes that they see offering the best opportunities over next 12 months are international stocks (50%), real estate and domestic stocks (43%), followed by international bonds (39%).
No other country considers bonds an asset class to invest in as much as Italy: it is the highest percentage not only in Europe (Spain 25%, France 24%, UK 23%, Germany 19%), but also globally (22%), according to Legg Mason.
The Italian preference for bonds comes from “historic convictions built up over the years, when bonds were synonym to low risks and guaranteed returns”, said Marco Negri, country head of Italy at Legg Mason GAM.
Investors, however, have to be aware that the current market scenario has changed significantly and that it is characterised by strong volatility, Negri, (pictured), added.
“We are not saying that investors should keep away from fixed income, but they have to be able to select – among a wide offering – [which] bonds to include in their portfolios,” he said.
Ex-Italy seen ‘best’ for investment
According to the Italian investors surveyed, the best investment opportunities for 2016 lie outside Italy’s borders, with the US and India, Australia and Japan seen as the markets most likely to perform well.
The countries these investors said they saw as posing the greatest investment risks this year, meanwhile, were China, Brazil and Russia.
The respondents’ current portfolios reflect their lack of “home market bias”, the survey found, with 30% of their holdings being invested outside of Italy – thus confirming Italy’s reputation for having the most internationally-focused investors in Europe, followed by the UK (17%), France (19%), Spain (16%) and Germany (15%).
This preference for ex-Italy investing is expected to continue, with some 63% of the Italian investors surveyed saying they expect to be even more focused on international investments over the next 12 months as compared to last year – even given the liklihood of global uncertainty (54% said they saw this as likely over the year ahead), currency risk (40%) and lack of transparency (23%).