1 Figures may not sum to 100% because of rounding.
2 Excluding respondents who answered ‘don’t know’ (n=316)
3 Excluding respondents who answered ‘don’t know’ (n=259)
4 Excluding respondents who answered ‘don’t know’ (n=239)
We looked at over £50 billion of assets held in UK funds and found a highly worrying gap between what investors expect and the reality of fund performance.
1 Respondents who answered ‘don’t know’ are not shown and figures may not sum to 100% because of rounding.
2 Period: July 2007 to July 2017. Maximum drawdown between July 2007 and July 2017, so maximum loss of an investor entering and exiting at the worst times.
3 Includes funds labelled ‘defensive’.
More than half (51%) of the investors surveyed were unsure of the level of loss they would be willing to accept before selling their investments. Out of those who could define a level of loss that would make them sell, almost half (47%) indicated they would sell at losses of less than 20%.
Only a minority - 17% of all respondents and 35% of those that didn’t reply “don’t know” - wouldn’t sell regardless of loss. This implies that many investors would find it difficult to stick with a buy & hold strategy irrespective of fluctuations in the value of their investments.
1 Figures may not sum to 100% because of rounding
2 Excluding respondents who answered ‘don’t know’ (n=712) from the total respondents who have a pension/savings/investment product (n=1,384)
The wealth management industry needs to do better. There needs to be a much higher degree of transparency around risk. Understanding risk better won’t deter investors, it will make them more confident of their choices.
At Scalable Capital, we believe there is a better way to invest. We don’t use vague labels when describing portfolio risk. Instead, we use a percentage loss level to give investors a precise understanding of downside exposure in their portfolio. We use Value-at-Risk (VaR), which tells the investor, with 95% certainty, the level of loss that should not be exceeded over the next year. By framing risk in a different way and measuring it with a reliable metric, our clients know how much downside risk they are taking right from the start.