Wealthy investors keep cash despite market optimism

Australia's high-net-worth investors remain optimistic about market returns but are retaining significant cash holdings as interest rates, inflation and policy uncertainty complicate investment decisions.

Research from Praemium and CoreData's Rich Decisions report found 81% of high-net-worth (HNW) investors expect markets to perform well over the next 12 months. However, cash remains the third most commonly held asset class, with 53% of investors holding it at an average of 20% of their portfolios.

Australian equities and residential property remain more prevalent, held by 57% and 54% of respondents, respectively.

Uncertainty surrounding the 2026-2027 Federal Budget reinforced the defensive position, with 32% of investors having increased or were planning to increase cash allocations in response.

Interest rate movements were the leading portfolio concern, cited by 48% of respondents, followed by inflation (45%), a potential global economic slowdown (44%) and financial policy or tax changes (42%).

Yet investors are not uniformly retreating from risk. More than half (54%) adjusted their portfolio allocations over the past year, including 37% who both reduced risk in some area and increased exposure to opportunities elsewhere.

Technology and artificial intelligence topped the list of investment opportunities, nominated by 45% of investors, ahead of interest rate cuts at 39%. Domestic and international equities each attracted 35% of responses, while 31% identified private markets and alternatives.

"Cash isn't necessarily a vote against growth," said Praemium acting chief executive Denis Orrock.

"HNW investors can see opportunities in technology, equities and private markets, but they're also navigating interest rates, inflation and policy uncertainty. Cash gives them the flexibility to act when the right opportunity emerges."

Demand for advice is also rising, with 29% of investors having sought advice since the Budget. A further 28% of advised investors want more support accessing alternative investments.

"The question isn't simply whether investors are holding too much cash, but what would give them confidence to deploy it," Orrock said.

"For advisers, that creates a broader portfolio conversation around liquidity, diversification and how new opportunities fit alongside existing holdings," said Orrock.