Morningstar Publishes Inaugural Global Investor Portfolio Study, Finds Wide Divergence in Investor Behavior and Portfolio Construction Across 14 Markets

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Study examines how local market practices, investment product availability, and regulatory landscapes influence global investors’ financial preferences and risk tolerance in portfolios

CHICAGO, Oct. 25, 2022 /PRNewswire/ — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its inaugural Global Investor Portfolio Study, which examines how individual investors in 14 markets construct portfolios. The study finds there is a wide divergence in portfolio preferences based on where an investor is located.

“Our inaugural global study of portfolio construction shows that there is no such thing as an average investor,” said Wing Chan, lead author of the study and head of manager research for Europe and Asia Pacific. “As investors around the world demand more personalized portfolios, it’s important to understand the factors that drive investing behaviors in order to improve the investing experience and empower investors’ financial success.”

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The study analyzes how local market practices and investment culture, retirement safety net, and regulatory landscape drive investors’ financial needs and their appetite to take risks in their portfolios. It also considers the availability of financial products, how investors approach portfolio construction, the overall asset allocation of portfolios, and the magnitude of home-market bias – when a portfolio’s geographic exposure is skewed towards the investor’s home market.

The Global Investor Portfolio Study is available here. Highlights include:

  • Investors are more willing to take risks in their portfolios when they begin investing early in life. This is seen in markets with a higher prevalence of defined-contribution retirement schemes, where investors tend to build or are defaulted into more aggressive portfolios with higher equity weightings and less bond and cash exposure. This includes markets such as Australia, New Zealand, the United Kingdom, and the United States.
  • In contrast, in markets such as France, Germany, and Japan, which have defined-benefit schemes and, in some cases, are supported by universal healthcare and a comprehensive social security net, there is less incentive for investors to make their own financial planning decisions. As a result, these investors tend to have conservative portfolios.
  • Real estate makes up most non-financial asset wealth globally and is the primary reason investors take on significant debt, especially in highly indebted markets such as Australia, Canada, China, Hong Kong, and New Zealand.
  • Home-market bias is prevalent in all markets, though there are often additional drivers beyond traditional reasons such as familiarity, accessibility, and avoiding currency risk. These include the size of the domestic equity and bond markets, capital controls, and tax benefits.
  • U.S. investors generally have a high appetite for risk, as U.S. households hold the least amount of cash and deposits. Investors in Japan, however, represent the most conservative cohort, with more than 50% of households’ assets sitting in cash or deposits, despite more than two decades of close-to-zero interest rates.
  • While sustainable investing is most popular in Europe and is gaining interest in Australia, New Zealand, and North America, environmental, social, and governance (ESG) issues have yet to become top considerations when investors construct portfolios in Asia. In the U.S., sustainability plays a supporting role in investment selection, but ESG considerations appear to be particularly important to younger investors.
  • Cryptocurrencies are included in portfolios across the globe but continue to be used by a minority of investors, with a heavy concentration among younger cohorts. The most cryptocurrency-friendly investors are in Singapore – which is home to several prominent cryptocurrency companies, Hong Kong, and Canada – which has over 14% of assets allocated to the space.

Methodology

The study is based on investment instruments available to the general investing public, which is defined as retail and mass affluent investors who have the capacity to invest in their local markets. The 14 markets in the study include Australia, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, New Zealand, Singapore, Switzerland, the United Kingdom, and the United States.

The studied markets represent a mix of developed economies in each region as well as two of the largest emerging markets, China and India. Rather than extend the coverage to a larger number of markets in the inaugural study, Morningstar elected to cover a wide range of issues in each market to highlight the key differences around portfolio building and investor practices.

Morningstar’s manager research analysts in each market analyzed key publicly available data sources (such as central banks and statistical agencies), major global studies, and locally published research, as well as consulted Morningstar’s deep database of managed products, to understand allocations and product preferences. Each analyst has filled out a survey detailing their sources. The surveys were peer reviewed by designated editors for each market, as well as the study authors. The authors provided guidance and oversight of the suitability of sources. Ultimately, our conclusions on each market are derived from both qualitative and quantitative comparative analysis.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $253 billion in assets under advisement and management as of June 30, 2022. The Company has operations in 29 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.

Morningstar Manager Research Services combines the firm’s fund research reports, ratings, software, tools, and proprietary data with access to Morningstar’s manager research analysts. It complements internal due-diligence functions for institutions such as banks, wealth managers, insurers, sovereign wealth funds, pensions, endowments, and foundations. Morningstar’s manager research analysts are employed by various wholly owned subsidiaries of Morningstar, Inc. including but not limited to Morningstar Research Services LLC (USA), Morningstar UK Ltd, and Morningstar Australasia Pty Ltd. This press release and the Global Investor Portfolio Study is for informational purposes only.

©2022 Morningstar, Inc. All Rights Reserved.

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Media Contact:

Landon Hudson, +1 312 696-6037 or [email protected]

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