Affluent investors worldwide allocate nearly one-third (32%) of their portfolios to cash. However, those planning to rebalance their portfolios within the next 12 months say they will invest 54% of this cash, on average, the new report finds.

This trend is especially notable among Gen Zers (age 25-27) and Millennials (28-43), who plan to invest 61% and 56% of their cash, respectively, according to HSBC’s latest Affluent Investor Snapshot.

Investors in mainland China (31%), Hong Kong (33%), the United Kingdom (37%), and the United States (34%) will also deploy more of their cash compared to other markets.

Meanwhile, investors in Southeast Asia show some of the lowest average cash allocations, with affluent individuals in Indonesia, Malaysia and Singapore holding just 24%, 27% and 27%, respectively.

Portfolio diversification

Beyond cash and cash equivalents, public equities (15%) and fixed income (14%) represent the two largest individual asset classes by average portfolio allocation.

However, affluent investors are planning to diversify their portfolios further across asset classes, investment instruments, and geographies, with individuals in Asia spearheading this trend over the next three years, according to the study.

Investors in India stand out for having the highest level of diversification globally, a highly active approach to investing, and being the most likely to reassess their portfolios.

Despite affluent investors across the world demonstrating “home bias” in their investments – as reflected in their equity exposure – over one-third say they intend to increase their investments in international markets, with the United States and mainland China ranking as the top two destinations.

But almost half of all investors say ongoing uncertainty around market conditions and the complexity of maintaining a portfolio present hurdles to diversifying further.

“It’s clear from this data that affluent investors increasingly recognize the importance of time in the market and not timing the market, as well as diversifying to build more resilient portfolios,” says Lavanya Chari, global head of investments and wealth solutions, HSBC global private banking and wealth.

More open to alternatives

Gen Zers and Millennials differ from older generations on how they approach their investments, with the former beginning their investment journey earlier and dedicating a higher proportion of their income (27%) towards investing compared with Baby Boomers’ (age 60-69) 22%.

There is also a growing awareness and intent to own alternative investments as part of a well-diversified portfolio among Gen Zers and Millennials. In particular, these younger generations exhibit a strong interest in adding private market funds and hedge funds to their portfolios over the next three years.

”The fact that young investors are looking more closely at alternative assets serves as another tailwind for the asset class, as product and platform innovations improve accessibility for a wider range of investors, especially to private markets,” Chari adds.

The HSBC report was based on data gathered from 11,230 affluent investors across 11 markets. The respondents have investable assets ranging from US$100,000 to US$2 million.