Global institutional investors and wealth managers are increasing their cash holdings at an unprecedented rate amid ongoing inflation concerns and heightened geopolitical risks, according to a recent report by Marsh Investments. The consultancy surveyed 430 asset owners overseeing assets totaling approximately $5.76 trillion and found a significant shift in portfolio allocations underway.

The survey revealed that 37.8% of respondents intend to boost their cash allocations over the next 12 months, marking a substantial rise from just 9% in the previous year’s survey. This translated to a net positive cash allocation increase of 22%, representing a 35.5 percentage point jump—the largest year-on-year move among asset classes measured.

Meanwhile, investors are withdrawing from US and UK equities, with net allocation intentions declining to negative 10.3% and negative 16.5%, respectively. These were the only two asset classes where more respondents planned to reduce rather than increase exposure. According to Marsh’s global chief investment officer, Niall O’Sullivan, these changes reflect a deliberate “barbell” strategy among asset owners, seeking to enhance downside protection and portfolio diversification while maintaining flexibility to exploit market opportunities.

The survey, conducted during June and July, identified geopolitical tensions and inflation as the dominant risks influencing near-term investment decisions. Over 70% of those surveyed cited these factors as significant concerns shaping their strategies.

At a recent briefing in Hong Kong shortly before the US Federal Reserve raised its benchmark interest rate by 25 basis points, Mike Sebastian, Marsh’s global head of multi-asset investing, expressed a cautiously optimistic short-term outlook for equities, supported by robust corporate earnings. However, he warned that medium-term market prospects remain uncertain due to volatile influences such as geopolitical disruptions, rising energy prices, and tight credit conditions. Sebastian encouraged investors to diversify holdings and regularly review portfolio exposures to navigate anticipated volatility.

Supporting this view, more than half of respondents indicated plans to increase allocations to infrastructure assets, while nearly 50% aimed to boost exposure to emerging market equities. This push for greater diversification extended to the Asia-Pacific region, where 53% of investors reported adjusting their geographic exposure over the past year, seeking to mitigate risks associated with concentration in single markets.