Vanguard Investments global CEO Bill McNabb has a tough message for investors

INVESTORS should brace for a riskier decade ahead without the higher returns they usually receive for taking on that risk, an investment leader said.

Anthony KeanePersonal Finance Writer

less than 2 min read

February 16, 2017 - 4:12PM

News Corp Australia Network

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INVESTORS should brace for a riskier decade ahead without the higher returns they usually receive for taking on that risk, one of the world’s most powerful investment leaders said.

Vanguard Investments global CEO Bill McNabb, whose company oversees more than US$4 trillion of people’s money, believes shares will return about 2 per cent a year less than they historically have.

The warning comes as US stocks hit fresh record highs early yesterday and Australian shares are near 20-month highs.

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“I think we are entering a period where we should expect more uncertainty,” Mr McNabb told the SMSF Association national conference in Melbourne.

‘The downside for the investor is you are not going to get compensated for it, and that’s actually a really tough message to take to investors.”

Vanguard’s models for the next decade have sharemarkets in the developed world running 2 per cent below 30-year averages and bond markets also weaker.

“So what you have is the two major liquid asset classes running a couple of hundred basis points below long term average, yet you have got more uncertainty out there and therefore likely more volatility. That is a really dangerous formula for the end investor,” Mr McNabb said.

Bill McNabb, the CEO of the Vanguard Group, at the Wentworth Sofitel hotel in Sydney. Picture: Britta Campion / The Australian.

He noted the period between the 1980s and 2000s when US shares averaged 17 per cent annually for two decades and “your money was doubling every four to five years”.

“That’s not going to happen in the next 10 years,” he said.

“What you are seeing is really the impact of 10-20 years of globalisation and technological revolution,” he said.

“Those forces are really changing the landscape and driving geopolitical uncertainty. They’re going to be with us for a while. I think forever. “

Vanguard was urging its clients to reduce their home country bias, Mr McNabb said.

“Globalise your portfolio,” he said.