12 September 2015, 17:38
Johannesburg - Some say they are the modern-day dreamers or the "lost generation", but, when it comes to the Millennials, is it possible that the critics got it wrong? asks Jordan Weir, junior trader at Citadel.
Between 1980 and 2000 one of history’s most dynamic generations was born. the Millennials (otherwise known as Generation Y) opened their eyes to and embraced the birth of the Information Age. And now the Millennials have come of age.
With disposable information at their fingertips, Millennials are well versed on the history of investing, the inquisitive Millennials are now more informed than ever.
The Millennials bring to the table a new way of thinking, according to Weir, one which is not far removed from senior generations but which builds on the priceless knowledge handed down and adds a different angle of thought.
As a result, the Millennials are increasingly seeking role models and mentorships from within their own peer and age groups. The days of solely looking to older generations for guidance has shifted.
With old ways of thinking continuing to impact how corporates and governments around the world operate, and, in the process, draining reserves from the remuneration and job pools, a storm is on the horizon. A flood of new blood and businesses are rushing ever closer and very few people seem to have seen it coming.
The likes of Google, Yahoo and Paypal, founded by members of Generation X (born between 1961 and 1979), are the forebearers of a resurgence to a new era of millennial entrepreneurs such as Facebook, Instagram, AirBnB and Snapchat, to name but a few.
On the local front, Weir says, more and more opportunities continue to present themselves like low lying fruit to the ambitious South African Millennial. As South Africa’s manufacturing numbers trend south, consumption numbers seem to be rising among the country’s population. With this in mind, Millennials have now begun to embrace the contrarian mindset of ‘what makes me happy?’ Sports cars and mansions are slowly becoming a thing of the past and materiality seems to be taking a back seat.
The wealth habits of this group are key to understanding the future of investing. According to two recent research reports, by bankrate.com and UBS, only 26% of Millennials are currently investing in equities. Of the portfolios surveyed, the average portfolio held a 52% weighting in cash. This may sound extremely risk averse to the modern-day investor, but it actually reflects a very similar mindset to that of the Baby Boomer generation (individuals born between 1945 and 1964). The Baby Boomers mainly invested in Certificates of Deposits, bonds and property, rather than stock market equities.
Although Millennials have, to a large extent, shown signs of fearing the stock market, they have also shown an overwhelming trend towards investing in projects and businesses aligned with personal lives and belief systems. One could call this ‘impact investing’. What is impact investing? Well, The Global Impact Investing Network definition puts it this way: “Impact investments are investments made into companies, organisations and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below-market to above-market rates, depending upon the circumstances.”
As a result; crowd funding, private equity and venture capital firms have silently started moving money away from the traditional banking institutions that have for many years been the lifeline to corporates and entrepreneurs.
This does raise questions about whether this healthy and active, emotionally conscious and cash flush new Millennial generation is really a financier’s pot of gold? Rather, the attitude of the Millennials may actually represent the beginning of the end for the bankers, wealth managers, asset managers and hedge funds of today. That is, unless they adapt.