MANILA – Most Filipinos would rather save in cash rather than other investment instruments, which is seen as the key factor in limiting investment growth, a new report by an insurance company claims.
In a Manulife Asset Management report, “One step forward, half a step back: Meeting financial goals in Asia,” it was claimed that the cost of retirement, education, living expenses and healthcare in the Philippines is rising faster than average investment returns of Filipinos.
It said that these expenses have increased an average of 8.1 percent a year in the past five years while investment portfolios only delivered average returns of 4.6 percent a year in the same period.
“In the Philippines, we looked into the goals of saving for a rainy day and for children’s higher education. We found that healthcare costs have risen 11.9 percent annually over the past five years. Meanwhile, the cost of education has risen an average of 8.2 percent a year over the past four years,” said Michael Dommermuth, executive vice president and head of Manulife’s Wealth & Asset Management in Asia.
The research showed that the limited investment growth is the result of the high level of cash investors hold in their portfolios.
According to the survey, the average Filipino holds 38 percent of their assets in local currency, with another four percent held in foreign currency. In total, cash represents 42 percent of their assets.
“Filipinos are hardly alone, with survey respondents across Asia reporting that 37 percent of their assets are allocated to local currency and another 5 percent to foreign currency. Our research reveals that this level of cash holdings is the key factor preventing investors from generating returns that match or exceed the growth in the cost of their five leading financial goals,” Dommermuth said.
Aira Gaspar, chief investment officer of Manulife Philippines, said reallocating a portion of this cash could increase returns and reduce the potential gap between investment earnings and growing cost.
“We found that shifting 50 percent of local currency holdings to higher yielding instruments could allow Filipinos’ savings to grow more rapidly and possibly reduce, if not eliminate, the potential returns shortfall,” said Gaspar.