Wealth Strategies

Cash Dominates Affluent Investors' Portfolios

Tom Burroughes Group Editor 6 June 2024

Cash Dominates Affluent Investors' Portfolios

The figures illustrate how cautious many investors remain.

A study of 11,230 affluent investors individual investors – those with assets from $100,000 to $2 million – found that they keep almost a third of all their holdings in cash, showing a high level of caution.

The study, from HSBC carried out in March covering 11 markets, found that 32 per cent of allocations are in cash. However, those planning to rebalance portfolios within the next year say they will invest 54 per cent of this cash, on average. The study (see pie chart below) shows equities as a holding in second place, at 15 per cent.

The data appears to be in accord with recent fund flow figures suggesting that while equities have risen this year, affluent and HNW investors are taking a cautious view, mindful of geopolitical risks and related uncertainties.

HSBC’s new Affluent Investor Snapshot 2024 reveals that affluent Gen Z and Millennials plan to invest 61 per cent and 56 per cent of their cash, respectively. Investors in mainland China, the UK, and the US will also deploy more of their cash compared with other markets. 

Some 39 per cent of investors intend to reshuffle portfolios in the next 12 months.

Affluent investors intend to add more alternative investments, particularly in private market funds and hedge funds, and 34 per cent of those in major international wealth centres intend to invest more internationally, with the US and mainland China as their top destinations.

In other findings globally, 63 per cent of respondents said they seek the financial services sector for investment guidance, although business and financial websites (34 per cent), and friends and family (33 per cent) also rank highly. 

Meanwhile, investors in Southeast Asia, to take one specific region, exhibit some of the lowest average cash allocations, with affluent individuals in Indonesia, Malaysia and Singapore holding just 24 per cent, 27 per cent and 27 per cent, respectively. 

Beyond cash and cash equivalents, public equities (15 per cent) and fixed income (14 per cent) represent the two largest individual asset classes by average portfolio allocation.

However, affluent investors are planning to increase the diversity of their portfolios across asset classes, investment instruments, and geographies, with individuals in Asia leading this trend over the next three years, HSBC said. In particular, investors in India stand out for having the highest level of diversification globally, a highly active approach to investing, and being the most likely to reassess their portfolios.

Source: HSBC.

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