Rich Picking

When an economy is emerging from a downturn, there is typically a moment when investor sentiment does an about-turn from negative to positive, giving a clear signal to the markets that things are looking up.

The latest signals, however, are rather muddied. High net worth investors (HNWI), who are a lead indicator for the markets, are much more likely than the lower echelon to be looking to rebalance to equities this quarter – yet they also continue to plough into cash.

CoreData’s High Net Worth Report, which tracks trends among those with more than $750,000 in investable assets, suggests sentiment towards Australian shares and international equities is much stronger among HNWIs, with almost two in five (37%) looking to rebalance towards Aussie equities in Q3, compared to only 20% of the rest of the market.

Comparing the next quarter to this past quarter, are you more or less likely to rebalance your investments towards the following asset classes?

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Furthermore, one quarter (25%) of HNWIs are likely to rebalance to international shares, compared to just 12% of LNWIs.

The HNW sentiment towards international shares is interesting given the sovereign debt woes plaguing Europe and the precarious nature of the US economy, but potentially reflects a desire from those investors to diversify beyond shares and cash, since property has fallen heavily out of favour.

And while one quarter are likely to rebalance towards global shares, sentiment remains more negative than positive with almost half (47%) of HNWIs saying they are less likely to rebalance towards international equities this quarter.

But while a considerable portion of the rich are looking to rebalance to shares next quarter, intentions for cash holdings suggest investors are hedging their bets.

Two in five HNWIs are likely to rebalance to cash (39%) next quarter, as are 28% of LNW. There remain too many signs that the uncertainty will continue.

*CoreData’s High Net Worth Report is available for purchase. For more information, please call 02 9376 9600