Capital Group survey reveals that High-Net-Worth-Individuals hold large amounts of cash

Seventy-eight percent of global high net worth individuals (HNWIs) have a large cash position, according to a survey by Capital Group, the world's largest active fund manager, with more than $2.5 trillion assets under management. Cautious about investing, almost half (48%) of these investors consider fixed income to be as risky as equities. Fears of higher volatility (60%), faster inflation (56%) and rate hikes (41%) are among the concerns they mention for the next 12 months.

It is easy to be safe in liquidity, but we believe that perhaps the biggest market concern currently is holding excess cash. Historically, cash rates decline rapidly once central banks peak, so for high net worth individuals, holding too much cash in the portfolio could hinder long-term wealth generation. History has shown that fixed income and equities outperformed cash when the Fed finished raising rates. From a long-term perspective, we believe now is the time to move out of cash.

Alexandra Haggard, head of asset class services for Europe and Asia at Capital Group.

Geopolitics is seen as a major risk, making 55% of investors increasingly uncertain about where to invest, but there is optimism for the longer term:

• 63% plan to invest more in equities over the next 12 months, with a third citing good value for money as the reason for the increase.
• Investors plan to increase their allocations to fixed income (49%) within one year, with a preference for higher quality fixed income.
• Ninety per cent of HNWIs favour government bonds, 85 per cent high yield bonds and 84 per cent investment grade corporate bonds.
• Among High-Net-Worth-Individuals surveyed, 58% expect fixed income and equities to be less risky than cash, as they can beat inflation over the next ten years.

Despite macroeconomic uncertainty, this environment still presents opportunities for long-term investors focused on fundamentals. Bonds play a central role in a well-diversified portfolio and the expansive global fixed income market presents abundant 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 yields for potential future income.

Scott Steele, Head of Fixed Income, Europe and Asia at Capital Group