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Alan Polley: Time to rethink the role of cash in portfolios

Cash as an asset class is becoming more attractive and investors should be ready to rethink its role in a balanced portfolio, says Pendal’s ALAN POLLEY

  • Cash yields should start to rise as inflation increases
  • Among defensive assets, cash could outperform
  • Find out more about Pendal’s multi-asset funds and cash funds

HOLDING cash in a portfolio hasn’t been very rewarding in recent years.

With interest rates at record lows, real returns have been negative and few investors have been rushing to put their money into cash.

But it might be time to rethink cash in a portfolio says Alan Polley, a portfolio manager in Pendal’s multi-asset team.

“Cash as an asset class has been poor, but with rates normalising due to inflation, cash yields are going to go up,” Polley says. “Cash as an asset class will start to become more attractive.”

“It’s a reflection of inflation expectations and inflation going up. When prices are rising, cash can be a bit of an inflation hedge.

“Looking forward, it should play more of a role in a balanced portfolio because inflation is going up,” Polley says.

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Cash comes in many guises. Generally, it is defined as investments with a term of no longer than 90 days. It might be a three-month bank bill, money in a savings account or a term deposit, or cash management trusts.

It has many attributes, not least it’s among the safest of the defensive assets.

“Cash is a store of wealth which provides protection that other assets don’t always have in times of stress. It provides optionality in a portfolio and provides a medium to longer term link to inflation,” Polley says.

Also, other asset classes are priced relative to cash. So as cash starts to provide higher yields, other alternate investments will look relatively less attractive.

“There are a number of cash-alternative asset classes like crypto-currencies, gold and some collectables, that have performed very well.

“Part of the reason is that investors, in response to the very low returns of cash, have looked elsewhere to put their money,” Polley says.

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“But cash will start to look better relative to those investments.”

He says investors don’t yet need to rush to put their money in a cash-based assets.

“Investors don’t have to do this right now. But over the next year or two cash is going to become relatively more attractive compared to the past few years. People should start thinking about that now and get themselves set up,” Polley says.

“Cash should also outperform other defensive assets as interest rates rise, providing capital protection in particular for investors with a lot of fixed income exposure such as conservative risk profiles.

“Cash is becoming relatively more attractive than other defensive asset classes.”

Find out about Pendal Stable Cash Plus Fund and Short-term Income Securities Fund


About Alan Polley and Pendal’s Multi-Asset capabilities

Alan is a portfolio manager with Pendal’s multi-asset team.

He has extensive investment management and consulting experience. Prior to joining Pendal in 2017, Alan was a senior manager at TCorp with responsibility for developing TCorp’s strategic and dynamic asset allocation processes covering $80 billion in assets.

Alan holds a Masters of Quantitative Finance, Bachelor of Business (Finance) and Bachelor of Science (Applied Physics) from the University of Technology, Sydney and is a CFA Charterholder.

Pendal’s diversified funds provide investors with a variety of traditional and alternative asset classes and strategies.

Find out more about Pendal’s multi asset funds:

Contact a Pendal key account manager here


This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at February 23, 2022. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

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