Investors were considering an allocation to growth assets as the trend away from risk assets to cash started to reverse, a Lanyon Asset Management portfolio manager said yesterday.
Cash balances were still higher than pre-global financial crisis levels, but falling interest rates would impact on the amount of income a portfolio could generate, so investors were starting to look for assets that could generate a higher yield, Lanyon Asset Management portfolio manager David Prescott said.
"I think there has been a trend away from risk assets to cash assets, but I would say that started to reverse over the last six months," Prescott told InvestorDaily.
"What we have observed is a slight increase in risk appetite and we're seeing investors starting to shift cash back into growth assets."
Official interest rate cuts were a key reason for the shift in appetite, he said.
"Cash rates have been coming off, so cash has been a very attractive investment in Australia. We're paying around 5.5 per cent for cash investments, which is really a 2.5 per cent real return," he said.
"When you look in offshore markets, investors can't generate those sorts of returns from investing in cash assets."
He said as the Reserve Bank of Australia cut interest rates, the attractiveness of investing in cash was starting to deteriorate.
"So investors are no doubt looking to increase the yield that they can generate from their portfolio and are investing back in yielding assets, whether that be property or shares," he said.
