Investors were likely to increase their cash allocations owing to high returns and a rise in the number of investors reaching retirement, a Macquarie Adviser Services executive said yesterday.
"I think as you see an aging population and more people entering into retirement, given the shock that the global financial crisis (GFC) probably gave a lot of people, I think you'll find an increase in the proportion of portfolios that are allocated to cash," Macquarie Adviser Services head of cash product Peter Forrest told InvestorDaily.
Forrest said cash was also becoming a bigger part of investors' portfolios because of high returns being offered by the banks.
"With the returns you can achieve, having a proportion in cash achieving those higher returns makes sense for a lot of people," he said.
"So, with term deposits earning a rate in excess of 5 per cent, and in some cases 6 per cent, that's actually a good return in comparison to alternative investments, which may have higher risk."
He said he was also beginning to notice a change in the way advisers managed cash.
Investors used to hold cash just to meet their short or medium-term needs, but now investors and advisers were beginning to use cash as part of a long-term strategy, he said.
This is particularly true among investors who are more risk averse or who are heading towards retirement where capital security is important.
"We're seeing the trend with an aging population, we're seeing this trend play out and believe it will continue. I guess it is more enhanced in the current market with continuing market concerns," Forrest said.
