Post-crash investors living in a ‘world of low numbers’

Returns the size of the 1980s unlikely in today’s low-growth world, says strategist

“Unless you are going to trade a hell of a lot,  you are not going to be getting the sorts of returns that you got 10, 15 years ago.” Photograph: iStock

“Unless you are going to trade a hell of a lot, you are not going to be getting the sorts of returns that you got 10, 15 years ago.” Photograph: iStock

 

Modern day investors are living in “a world of low numbers” where the high returns of the last century are unlikely to rematerialise, the head of Standard Life global investment strategy has said.

Andrew Milligan, speaking at the company’s annual conference in Dublin on Thursday, said investments are caught up in the reality of low inflation, low growth and lower profits.

“This is the world of low numbers we live in,” he said. “The point we have emphasised to investors for years is you cannot expect the returns you saw in the [1980s], the ’90s to be repeated – particularly this year with the global financial crisis.

“In June of this year, 40 per cent of all government bonds in the world were negative yielding, he added. “It’s still 25 per cent.”

Mr Milligan was responding to questions over investor satisfaction in historic annualised five-year returns of 4.2 per cent on property.

“With such low nominal economic growth around the world, any asset class achieving [similar returns] is actually attractive,” he said. “This is the harsh reality that we face as investors. Unless you are going to trade a hell of a lot, take extremely concentrated investment bets, you are not going to be getting the sorts of returns that you got 10, 15 years ago.”

Most conviction

Anne Breen, Standard Life’s head of real estate strategy, said the firm currently held the “most conviction” for continental Europe, particularly office space in Berlin, Copenhagen and Stockholm, and distribution warehouses across the continent.

“We did have a very favourable view on the Dublin market two to three years ago. The Dublin market has done very, very well,” she said, citing returns of 40 per cent in 2014 and 25 per cent in 2015, and expectations to deliver about 10per cent this year.

“You don’t expect you’re going to get those supernormal returns that you’ve had in the last three years,” she added. “But, actually, as part of a balanced portfolio Dublin will still perform relatively well over the next 12 months.”

In equities, Mikhail Zherev was positive about the tech sector. Instagram, he said, looked to be “the next glossy magazines” while YouTube and Facebook Video are appealing to advertisers targeting youth audiences, who have largely abandoned terrestrial television.

Among Irish stocks, Mr Zherev said Ryaniar, Glanbia, Kingspan and CRH were among the most favoured.