Investors are divided over on the level of cash allocation in a portfolio, with falling cash rates making alternative investment options more attractive.
Since March this year, there has been a further 75 basis points drop in cash rates, Investec head of adviser distribution Gareth Bird told InvestorDaily.
“I think people have now become more active in terms of looking for other options,” Bird said.
He said stocks with a good dividend, other fixed income opportunities, corporate bonds and hybrids are attracting more attention.
“You do have this dilemma now that maybe that 6 per cent number that was available a few months ago is now more like five or five and a quarter and it doesn’t have the same attractiveness that it did before,” Bird said.
“So I think the emergence of other options with regards to yield reducing investments are certainly going to become far stronger.”
Liquidity has also become a key influence, he added.
“The feedback from our advisers is that clients are equating illiquidity with risk, irrespective of if it is a good investment or not. They can’t get their head around how and when they are going to get their money back,” Bird said.
As yield returns come lower on cash, it is understandable that there is going to be a difference in behaviour from clients.
The stronger pull on cash has also increased competition amongst providers.
“Clients and advisers need to be more active in this space to ensure they are getting the best returns,” he said.
