Nairobi — Majority of investors are changing their investment decisions and looking to reduce their cash holdings in a bid to combat inflation, a new report shows.
The Standard Chartered’s Wealth Expectancy Report 2022, shows that 65 per cent of investors are more actively managing their wealth and making changes to their investment strategies, given the current economic challenges.
The report examines the shifts in investor decisions for more than 15,000 emerging affluent, affluent, and high net worth (HNW) investors in 14 markets, along with the resulting movements in major asset classes.
Investors cited inflation (34 per cent), an uncertain global economy (27 per cent), and the threat of recession (22 per cent) as their top concerns.
“Investors face a complex reality, with inflation, the threat of recession and an uncertain global economy ranking as their top concerns. Our research reveals that they are making changes to their portfolio allocations in response to these challenges, but it is important that they make decisions aligned with their objectives and the external environment,” said Marc Van de Walle, Standard Chartered, Global Head, Wealth Management.
The report noted that in the past year, investors have made changes to their finances, such as spending less (30 per cent) and making new decisions around their portfolios (25 per cent), which will prompt shifts in major asset classes.
To outpace inflation, 61 per cent of investors are looking to reduce their cash holdings. Cash allocations may fall from 26 per cent in 2022 to 15 per cent in 2023, as indicated by investor responses.
“Investors are reconsidering their holdings of equities as market volatility increases, although this asset class will remain an integral part of portfolios. Of those currently invested in equities, there is an indication that the allocation of equities in their portfolios may fall from 22 per cent to 13 per cent in the next year,” the report notes.
This year, gold continues to be of high interest, with 2 in 5 (37 per cent) saying they have invested as a result of inflation, and there is interest in bonds at a lower 22 per cent, to combat inflation.
Even so, sustainable investments are set to continue receiving investor interest and capital, even though greenwashing concerns persist.
More than half of surveyed investor(52 per cent) expect to increase their sustainable investments in 2023.
Further, the research reveals that 62 per cent still believe that digital assets are an important part of any investment portfolio, despite multiple setbacks in this year.
Currently, 66 per cent of investors hold digital assets and about a third (35%) believe them to be a longer-term investment.
According to the survey, the future demand for digital assets will primarily be driven by younger investors aged 18-34, with more than half (54 per cent) intending to invest more in the coming year.
In comparison, a lower (34 per cent) of those aged 55+ plan to up the investment of their digital assets year.
While many of the investors polled (62 per cemt ) were primarily managing their own finances, with some variation across markets, most investors in China (70 per cent) and Vietnam (71 per cent) use professional wealth managers.
On average, investors taking advantage of professional advice were more likely to have diversified portfolios, with an associated greater ability to weather market volatility and stay invested, and higher holdings in sustainable investments.
“We believe that diversified portfolios with multi-asset income generation strategies provide some of the best opportunities today. This approach, combined with personalised advice can help investors ride out the current market conditions and achieve their long-term goals,” said Walle.