Canadian investors return expectations not aligned with portfolio realities: CIBC Asset Management Poll

Feb 6, 2015 While Canadians are choosing security in the form of lower-rate, guaranteed products, many of them expect annual returns higher than their investments can deliver finds a new poll from CIBC Asset Management.

The poll revealed that 42% of Canadian investors are primarily investing in GICs, savings account and other low-yielding guaranteed investments. Of that group, 40% think they need annual returns of 4% or higher to meet investment goals an unlikely scenario given continued downward pressure on interest rates.

Fear is playing a key role in investors' portfolio allocation decisions with over two-thirds (67%) of those choosing low-rate investments saying they are afraid of losing their initial capital by investing in potentially higher-returning investments such as equities.

Infographic: The Great Disconnect - see more results from the 2015 CAM Investor Survey

Also available: Powerpoint presentation

"The disconnect between investors' return expectations and portfolio allocations could be a barrier to reaching investment goals", says Steve Fiorelli, Managing Director, CIBC Asset Management. "While the security of guaranteed investments plays an important role for many Canadians, a well-diversified portfolio that leverages an appropriate balance of fixed income and equities is vital if the goal is to grow your investment portfolio over time."

"Investors should focus on their overall long-term investment goals and work with an advisor to ensure that a plan is in place that meets their return expectations," adds Mr. Fiorelli.

The current low-interest rate environment factors into portfolio allocation decisions. The Bank of Canada cut its overnight rate target by a quarter of a percentage point to 0.75% in January.

The deflationary impact of low oil prices, and the European Bank's quantitative program will increase pressure on rates says Luc de la Durantaye, Head of Asset Allocation and Currency Management, CIBC Asset Management. "European interest rates have been pushed to historically low levels, which is expected to put additional downward pressure on North American interest rates well below consensus levels."

The results presented in this document were gathered through a Web survey conducted by Leger from November 21 to 25, 2014 among a representative sample of 1,505 English- or French-speaking Canadians, 18 years of age or older, who have an investment portfolio for retirement. Using data from Statistics Canada, the results were weighted according to gender, age, region, language spoken at home, education and whether or not children are present in the household to ensure a sample representative of the entire population under review.