Investors turn to cash assets in a bid to ensure greater security

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ONE in four investors in Yorkshire and the Humber has at least half of their assets in cash, according to new research.

Investec Wealth and Investment (IW&I), which has offices in Leeds and Sheffield, found that on average, investors in the region were keeping 39 per cent of their portfolio in cash.

For 28 per cent of people, at least half of their assets were in cash, while for one in ten, cash was their only asset. The research also showed that 55 per cent of people planned to maintain or increase their cash levels over the next year.

Simon Kaye, head of the Leeds office of Investec Wealth & Investment, said: “Our research suggests that cash may be viewed by many investors expecting further market dislocations as the least worst option right now, but with fear dictating investor sentiment, it would be wrong to ignore buying opportunities in the stock market.

“Companies are in pretty good health, so if the issues in the eurozone are resolved satisfactorily we could see a decent rebound in the market. Recent actions by both (Ben) Bernanke in the US and (Mario) Draghi in Europe indicate that the authorities are intent on supporting markets and preventing a loss of investor confidence.

“But if there is a disorganised break-up of the Euro or defaults from Greece and beyond, the UK stock market could suffer a material setback. So while equities look cheap, they could still become quite a bit cheaper.”

IW&I’s research shows that 61 per cent of investors who increased their cash allocation over the past year wanted greater security, fearing that investment products would fall in value. Only six per cent of investors increased their allocation to equities and other investment products.

Mr Kaye added: “Investors with particularly large cash holdings should think twice about this strategy over the longer term.

“It’s important to get the balance right between asset classes and we would argue that for most investors there is a strong argument to maintain a diversified approach including equities, bonds and alternatives. It should be remembered that cash has been the least rewarding asset class in the long term.”