Institutional Investor Cash Allocations Surge as Geopolitical Risks Rise

Institutional investor cash allocations are rising sharply as asset owners respond to geopolitical uncertainty, inflation and changing expectations for global equity markets.

A Marsh Investments survey of 430 asset owners managing a combined USD5.76tr found that 37.8% planned to increase cash allocations over the next 12 months, compared with just 9% in the previous year’s survey.

Net intentions towards cash increased by 35.5 percentage points to 22%, the largest annual rise among the asset classes covered.

US and UK equities were the only asset classes where investors planned to reduce exposure on balance. Net allocation intentions stood at minus 10.3% for US equities and minus 16.5% for UK stocks.

The survey, conducted in June and July, indicates that institutional investors are increasing portfolio liquidity as geopolitical and inflation risks complicate investment decisions and encourage greater caution over developed-market equity exposure.