Global Equity, Macro Strategy & Economics_ Identifying Retail Investor Shifts

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses trends in retail investor behavior in the context of the US and European markets, focusing on thematic investments, private markets, and money market funds. Core Themes and Insights 1. Top Investment Themes for 2025: - Innovation, Security/Defence, and Core beneficiaries of AI are the most popular themes among retail investors. Security/Defence has gained traction particularly in the US and Germany, with 36% of respondents indicating interest in this area [2][18][22]. - Preferred stocks in these themes include Rheinmetall in Europe and Fortinet in the US [2][7]. 2. Private Markets Engagement: - Retail investor engagement in private markets is increasing, with only 1-4% of wealth currently allocated to these assets. However, 20% of respondents made incremental investments in private markets over the last year, indicating a doubling of previous levels [3][41]. - Preferred investment vehicles for private markets include CVC and EQT in Europe, and Blackstone in the US [3][43]. 3. Money Market Fund Trends: - Money market funds (MMFs) have reached record highs with $9.6 trillion in assets under management (AuM). Despite this, inflows are expected to slow rather than reverse, as 72% of retail investors are open to reallocating funds to riskier assets under certain conditions [4][69][81]. - The survey indicates that 73% of retail investors with MMF exposure would consider moving to equities if certain conditions are met, such as a material decline in interest rates [4][82]. 4. Demographic Insights: - Younger investors, particularly Gen Z, show a higher propensity to invest in Defence/Security due to shifting geopolitical landscapes. This demographic is also more inclined to increase their investments in equities as life expectancy rises [14][32][58]. - The survey highlights a barbell investment approach among older generations, with increased allocations to both equities and MMFs [14][58]. 5. Bancassurance Model Strength: - The bancassurance model remains strong in Europe, with many retail investors using their primary banks for investments. This trend supports the growth of banks like KBC and Intesa [5][107]. Additional Important Insights - Geographic Preferences: Retail investors show a balanced interest in investing in Europe and the US, with a notable preference for global investments among higher-income European respondents [109][114]. - Market Conditions Impacting Investment Decisions: Factors such as improving personal finances, positive market momentum, and interest rate changes are significant motivators for retail investors considering reallocating their investments [87][100]. Conclusion - The findings from the survey indicate a shift in retail investor preferences towards thematic investments, particularly in innovation and security/defense, alongside a growing interest in private markets. The stability of money market funds remains a key consideration, with demographic trends influencing investment behaviors across different age groups.