Asia Pacific retail investors are hoarding more than half of their investable assets in cash despite targeting annualised returns of 8.6% over the next five years.

This is according to Fidelity International’s “Be Invested Global Study” which polled 13,000 retail investors across Asia Pacific and Europe.

The study found that 52% of Asia Pacific (Apac) investors were held in cash and over a third (36%) in cash savings accounts.

Charlotte Chan, head of HK global platform solutions & head of Hong Kong, Fidelity International said: “While it is encouraging that investors feel confident about meeting their long-term goals, our findings suggest this confidence is not always reflected in how portfolios are positioned.”

“Holding large amounts of cash may feel like a safer option, but over time it can limit the ability to generate the returns needed to meet long-term objectives.”

Despite holding large amounts of cash, retail investors in Apac are expecting annualised returns of 8.6% over the next five years, with more than two thirds (64%) confident this will be achieved.

Chan said this “aspiration-action gap” shows that investors cannot expect past returns to continue and that expectations of 8% per year “may be too optimistic in today’s environment”.

According to Fidelity’s estimates, a forward-looking estimate of how investments are expected to perform over the long-term, higher cash levels materially reduces long-term returns.

The study did find, however, that Apac investors recognise the need to put cash to work, with 51% of investors indicating they would move into equities, 31% would consider bonds and 32% would consider commodities.

However, nearly half (45%) of investors in the region valuer regular income and capital growth equally for their investments.

In Hong Kong, a lower cash return on cash products was the top motivation to shift out of cash into investments, whereas in Singapore more education on what to invest in was a key trigger to shift out of cash.

Chan said: “Many investors are holding cash for understandable reasons, whether that’s for short-term needs or waiting for the right moment to invest. But over time, holding too much cash can work against them, especially when they are targeting strong long-term returns.”

“The risk is that staying on the sidelines for too long means missing out on growth. When time is on your side, moving from cash to a balanced portfolio shows a real difference in annualised real return.”