Hong Kong, (1 December 2020) – PIMCO today released the results of a survey which shows that investors’ expectations, actions and intentions may not always be consistent, particularly in periods of volatility. According to PIMCO, who commissioned the Asia Pacific study, this finding underscores the importance of understanding possible biases affecting investment decision-making.
In the first of what will be a regular investment sentiment survey to gauge sentiment and outlook in challenging times, PIMCO found that investment biases can lead to potential inconsistencies in investor behaviors, such as investors expecting portfolio growth amid shrinking economies and seeking cash but claiming the best strategy is to time the market.
The survey indicated that 43% of the respondents across Asia Pacific said the pandemic has had a negative impact on their confidence in their own decision-making, and 44% expected it to continue to do so. This is probably because 51% say COVID-19 has had a negative impact on their portfolios so far, with 10% saying it has had a major negative impact.
The survey also showed that the pandemic has heightened investors’ enthusiasm for actively managed funds. Across the region, 55% of respondents’ portfolios were actively managed, with 46% of those surveyed saying they will likely allocate more to active strategies in the next three months.
Commenting on these findings, Adrian Stewart, Head of Client Management APAC ex-Japan, said, “The next few years will be an incredibly important time for active management as we expect markets to remain volatile. We firmly believe active management plays a key role in delivering alpha and long-term outperformance for investors, and this is what PIMCO has traditionally done well to find long-term value for our investors in dislocated markets.”
48% of the respondents in the region thought that the best strategy in periods of market uncertainty was to seek to time the market to buy risky assets as they got cheaper or seemed more likely to grow quickly in the new environment. However, the planned allocations of these respondents showed cash or cash-like assets topping the list. This implies a potential gap between how investors imagine they will react in times of uncertainty and how they do act.
Respondents in the region continued to trust their own history and experience most in making investment decisions above professional advice and information published by financial institutions and investment consultants. This could be significant since incorporating impartial professional advice is a key means of counteracting potential biases influencing investor decision-making.
Kimberley Stafford, Head of PIMCO Asia-Pacific, said “At PIMCO, we have long believed that a deeper understanding of cognitive and emotional biases helps mitigate their effects and should help our clients make better investment decisions. This regional survey is an integral part of the firm’s long-term efforts to support diverse and robust research around behavioural science.”