Wealthy investors are holding a lot of cash — an estimated $100 billion — in Australia at the moment, wary of market volatility and looking for an opportunity.
The number of high net worth (HNW) investors in Australia is on the rise again after stalling between 2014 and 2016.
The latest Investment Trends research shows there are 435,000 investors, an increase of 10,000 or 2% over the last 12 months, with more than $1 million in investable assets outside of their own home, business and non-self managed superannuation.
Australia’s high net worth population is estimated to control $1.7 trillion in investable assets, up 12% over the last 12 months.
Total investable assets collectively hit a five-year high in 2017, growth driven by an increase in the number of high net worth individuals and also because they are getting wealthier, according to King Loong Choi, senior analyst at Investment Trends.
“These investors — who predominantly draw their wealth from business profits, share investments, and property investments — have benefited immensely from the strong performance of both the Australian share market and property market over the last year,” he says.
But they have a problem — $100 billion is sitting on the sidelines as these high net worth individuals struggle to identify good investment opportunities.
The total cash holdings of HNW investors is estimated to be $290 billion.
A third of this, or about $100 billion, is considered by HNWs to be excess cash, or money that would normally have been allocated to growth investments were it not for recent market volatility.
“Almost all HNW investors say they expect to face investment-related challenges in the coming year, and this uncertainty has led to a large build-up of cash holdings,” says Choi.
“Right now, the perceived threat of another global financial crisis and difficulties in investment selection are the two biggest concerns of HNWs.
“Despite their muted outlook, half of HNW investors want material capital growth in their portfolios in the year ahead, and product manufacturers and technology providers play a vital role in assisting HNWs achieve their investment goals.”