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Private investors take control for higher returns

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Alternative assets platform CoInvestor is urging the UK’s Chancellor not to move further away from the pensions freedoms which have given investors more control and choice over their investments.

According to research carried out by YouGov, nearly half (48 per cent) of mass affluent Britons benefitting from the government’s changes to pensions legislation in 2015, say this is because it has given them control of their own investments.
 
A further 28 per cent enjoy being able to withdraw their pension at a lower tax rate, whilst one in five (20 per cent) feel it allows them to diversify into tax efficient investments. Only 21 per cent of respondents feel that pensions freedoms have not benefitted them, but nearly one in three (31 per cent) of these says is because they are already drawing their pension.
 
Around one in 10 respondents says they are interested in investing in private equity funds (11 per cent) and start-ups (9 per cent) in the future. This trend is strongest amongst younger generations, with one in five (19 per cent) of those under the age of 34 saying they are more willing to invest in alternative investments post-Brexit.
 
Investors are using multiple methods to seek out these alternative investments. More than a third (35 per cent) prefer to invest directly using an online platform, an option which is particularly popular amongst those aged up to 34 (44 per cent). Roughly the same number of respondents (32 per cent) would still prefer to go through a financial adviser in the first instance. Only one in five (20 per cent) list investing through a fund as their preferred route to access alternative investments.
 
The main driver for this move towards investing in alternative assets is the pursuit of higher returns (40 per cent), tax efficient investments (38 per cent) or to generate additional income yield (37 per cent). One in three (33 per cent) said they are seeking to further diversify their portfolio.
 
As is expected, these motives change with age. One in two (51 per cent) 45 to 54 year olds are looking for tax efficient investments, whilst over two in five (41 per cent) people over the age of 55 are looking to generate additional income yield from their alternative investments as retirement beckons.
 
Three quarters (74 per cent) of 18 to 44 years olds not yet invested in alternatives are not worried about the risk involved. This highlights an emerging generation of sophisticated investors more comfortable with risk and choosing to invest directly online, suggesting the financial advisory community needs to adapt and engage with younger audiences in a different way.
 
However, despite this, many people remain hesitant about diversifying their portfolios into alternatives. The main reason for this is the feeling that they do not have sufficient knowledge to be able to make an investment decision (55 per cent) whilst a further 36 per cent said they were worried about risk.
 
Charles Owen, founder of CoInvestor, says: “Clearly we are seeing a trend by private investors to take control of their pensions, their investments and their money. Individuals want to maximise their returns and protect again market volatility which is especially apparent in the current fragile socio-political outlook.
 
“As such, there is increasing consideration of alternative assets as a way to generate more income yield, take more calculated risk or maximise tax efficiency. This is particularly relevant for an ageing population looking to support their retirement.
 
“However, there remains some lack of understanding surrounding alternatives. Technology has fuelled the growth of a number of online platforms that now enable private investors to access asset classes that were previously exclusive. Financial advisers should be making it an absolute priority to work closely with these platforms and provide solutions for clients that allow them to diversify their portfolios and reap the benefits of this third asset class.
 
“If financial advisers do not adopt these technologies they risk losing relevancy, especially amongst a growing, online-savvy younger investor audience that should be their next generation of customers.”
 
CoInvestor is an online marketplace for alternative assets that allows private investors to coinvest in unlisted companies alongside experienced fund managers, and is working closely with the financial advisory community to help address these growing demands.
 
The platform is endorsed by top fund managers including Oxford Capital, MMC Ventures and Chelverton Asset Management and has the backing of a number of major industry figures including Matthew Peacock, founding partner at Hanover Investments, who acts as non-executive chairman.

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