World’s wealthiest worried about inflation, digital assets still of interest – Study

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  • More than half of some of the world’s wealthiest individuals are managing their wealth and making changes to their investment strategies, given current economic challenges, including inflation
  • In response to rising global inflation, two-thirds of investors are changing their investment strategies, with some spending less while others have made new decisions around their portfolios 
  • Gold continues to be of high interest, with 2 in 5 saying they have invested as a result of inflation, and there is interest in bonds at a lower 22% to combat inflation

A new survey has indicated that more than half of some of the world’s wealthiest individuals are managing their wealth and making changes to their investment strategies, given current economic challenges, including inflation.

The Standard Chartered’s Wealth Expectancy Report 2022 reveals a shift in investor decisions for over 15,000 emerging affluent, affluent, and high net worth (HNW) investors in 14 markets.

The results released in Kenya on December 7, 2022, indicate that two-thirds of investors are changing their investment strategies in response to rising global inflation.

As such, 34% of investors cited inflation, 27% an uncertain global economy, and 22% the threat of recession as their top concerns.

In the past year, investors have also made changes to their finances, such as spending less (30%) and making new decisions around their portfolios (25%), which will prompt shifts in major asset classes.

To outpace inflation, 61% of investors are looking to reduce their cash holdings. Cash allocations may also fall from 26% in 2022 to 15% in 2023.

Investors are also reconsidering their holdings of equities as market volatility increases, although this asset class will remain an integral part of portfolios. Of those currently invested in equities, there is an indication that the allocation of equities in their portfolios may fall from 22% to 13% in the next year.

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This year, gold continues to be of high interest, with 2 in 5 (37%) saying they have invested as a result of inflation, and there is interest in bonds at a lower 22% to combat inflation.

Sustainable investments will continue to receive investor interest and capital even though greenwashing concerns persist. More than half (52%) expect to increase their sustainable investments in 2023.

Investors still interested in digital assets despite a tough year

The research also found that 62% of sampled investors still believe that digital assets are an important part of any investment portfolio, despite multiple setbacks this year.

Currently, 66% of investors hold digital assets and about a third (35%) believe them to be a longer-term investment.

According to the survey, the future demand for digital assets will primarily be driven by younger investors aged 18-34, with more than half (54%) intending to invest more in the coming year. In comparison, a lower (34%) of those aged 55+ plan to up the investment of their digital assets year.

However, it is important to note this survey was conducted before the FTX crash, and the events of the past few weeks may dampen this sentiment.

Inflation and the threat of global recession remain a major challenge to investors globally

 While many of the investors polled (62%) were primarily managing their own finances, with some variation across markets, most investors in China (70%) and Vietnam (71%) use professional wealth managers.

On average, across the 14 markets, younger (18-35) investors (63%) are more likely to use a professional compared with 39% of those in the 55+ bracket. Investors taking advantage of professional advice were more likely to have diversified portfolios, with an associated greater ability to weather market volatility and stay invested, and higher holdings in sustainable investments.

Yatch on display showing wealth. Photo: Unsplash.

Commenting on the results, Marc Van de Walle, Global Head, Wealth Management at Standard Chartered said that investors face a complex reality, with inflation, the threat of recession and an uncertain global economy ranking as their top concerns.

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“Our research reveals that they are making changes to their portfolio allocations in response to these challenges, but it is important that they make decisions aligned with their objectives and the external environment,” he said.

“We believe that diversified portfolios with multi-asset income generation strategies provide some of the best opportunities today. This approach, combined with personalised advice, can help investors ride out the current market conditions and achieve their long-term goals,” he added.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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