Huge pile of cash Manulife

Added 15th June 2015

Huge pile of cash Manulife

Investors across the region rely heavily on cash savings, making it difficult to meet their key financial goals, the firm said.

Across Asia, local-currency cash holdings account for a “disproportionately” large percentage of self-reported assets at about 37%. This rises to about 42% if foreign-currency cash holdings are added.

 Source: Manulife Asset Management

The comparatively smaller weighting to equities and fixed income assets (as seen in the chart above), mean returns are severely diluted by lower-yielding asset classes, cash in particular.

Regional financial goals

Saving for retirement needs was ranked as the leading financial goal on a pan-Asia basis, followed by saving for unexpected expenses and children's education. Maintaining current lifestyle and saving for purchasing a home were among the other financial goals.

However, Manulife found that the cost of the five leading financial goals increased 6% per annum (4.4% including Japan). At the same time, self-reported investment portfolios delivered average total returns of 2.7% per annum (3.1% including Japan).

“The difference between these two reveals that the average investor across Asia faces a potential investment returns shortfall of 3.3% per annum (1.3% including Japan).”

Singaporean investors, for example, face a potential investment returns shortfall of 3.6% per year, exceeding the Asia (ex-Japan) average potential shortfall of 3.3%.

The average Singaporean holds 33% of their assets in local currency.

“We found that potential local currency returns on self-reported investment portfolios [in Singapore] are the lowest in the region,” said Michael Dommermuth, executive vice president, head of wealth and asset management.

Reallocating a portion of this cash to more efficient assets such as local market equities or fixed income could meaningfully reduce the shortfall. 

Shifting 50% of local currency holdings to local equities could cut the potential returns shortfall for Singaporeans to 2.7% from 3.6% per year, the firm said. 

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