All high net worth investors (HNWIs) in Hong Kong currently have relatively large cash holdings, according to a survey by Capital Group.
The US investment giant canvassed the views of 450 HNWIs globally, defined as those with at least $1m in personal wealth. It found that 100% of those surveyed in Hong Kong had cash holdings of more than 10% of their portfolio compared with 78% globally.
Alexandra Haggard, head of asset class services for Europe and Asia noted that the high levels of cash held in investors’ portfolio was a major concern.
“It’s easy to be parked in cash, but we believe that perhaps the biggest market risk today is holding excess cash. Cash rates historically decay quickly after the peak in central bank rates, hence for high net worth investors, having too much cash in a portfolio could hinder their long-term wealth generation,” she said.
“History has shown that fixed income and equity outpaced cash after the Fed finished hiking rates. Taking a long-term view, we believe now is the time to make the shift out of cash.”
Despite the large cash holdings, HNWIs demonstrated a willingness to put cash to work with 63% globally planning to invest more in equities over the next 12 months. Out of that 63% figure, one-third globally and 48% in Hong Kong cited good value as the reason for the increase.
96% of Hong Kong HNWIs also favour government bonds, slightly ahead of the 90% of HNWIs globally favouring them.
Meanwhile, in Singapore, all investors surveyed favoured high-yield bonds compared with 85% globally.
58% of HNWIs globally expect fixed income and equities to be less risky than cash over the next 10 years and that figure increased to 68% in Singapore.
“Despite the macro uncertainty, this environment still presents opportunities for long-term investors focused on fundamentals,” said Scott Steele, fixed income asset class lead for Europe and Asia at Capital Group.
“Bonds play a central role in a well-diversified portfolio and the expansive global fixed income market presents broad sources of yield, risk factors, and returns. The return of income to fixed income means that investors can benefit from putting cash to work in high quality bonds with attractive yield for potential future income.”
