Over $100bn war chest

Published in the Adelaide Advertiser, September 2009 by Katraina Barrymore

A massive "war chest" of more than $100 billion cash is about to be splashed around the investment markets, say analysts, as risk-shy mum and dad investors shrug off their fears about the global financial crisis.

The first signs of the cash outflow has already begun and is expected to gain momentum during the months ahead.

According to independent research firm CoreData, a record $105 billion in cash has built up in deposits during the past two years as people shunned the share market and other risky assets.

However, steadily improving performance of other investments is proving a major lure for cashed up investors, CoreData analyst Andrew Inwood said.

"The massive war chest in retail deposits stored during the global financial crisis will seek alternative assets which provide a higher yield and improved tax implications than holding a large cash asset," Mr Inwood said.

Although some of the $100 billion stash will find its way to the shops, "it is much more likely that funds will find their way back in to the stock market, investment property, superannuation and managed funds," he said.

Australian Unity chief investment officer David Bryant also said yesterday investors were starting to diversify and rebuild their portfolios.

"So is there a standout to invest in? I'd say property has the potential," he said. "The credit crunch has stopped a lot of overdevelopment and investment property going ahead. I'd look at property trusts, which have been through recent revaluations."

However, Wealth Within chief analyst Dale Gillham is not convinced that now is the time to move away from cash.

"Given that interest rates are likely to rise before the end of the year and that I believe the share market is quite possibly going to be trading lower in November, then I would suggest people adopt a wait and see attitude," he said yesterday.

"Once the low in November is confirmed then they could start moving some of their money in to the market in a staged approach but I would not look to be fully in shares but have a balance between shares, cash and possibly property."