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Cash is no longer king for Kenyan investors, who are now diversifying their portfolios into digital assets and sustainable investments to hedge against inflation, recession and uncertainty of the global economy, a new report has revealed.

According to the Standard Chartered (SCB) “Wealth Expectancy Report 2022”, high inflation is prompting shifts in how  peple are allocating their funds across different asset classes, from cash and equities to digital assets and sustainable investments.

It says people are spending less and looking to invest more to prepare for the higher cost of future financial liabilities. Consequently, investors expect to reduce their allocation to cash in the coming years.

For instance, according to the report, five out of every 10 Kenyans are spending less, with four out 10 investing more to combat inflation. The report, released yesterday also notes that 6 out of 10 plan to invest more on sustainable investments next year, while 8 per cent still believe in digital assets despite market turbulence.

The study was carried out between September and October this year, polling 15,206 respondents from 14 markets among them Kenya. It examines shifts in investor decisions for more than 15,000 emerging affluent, affluent and high net worth investors in 14 markets including Kenya, along with the resulting movements in major asset classes.

Paul Njoki, SCB’s Head of Affluent Banking and Wealth Management in Kenya and East Africa said the twin threats have led Kenyan investors to make changes to their portfolio allocations in response to these challenges, though he advised them to align their decisions with their objectives and the external environment.

“We believe that diversified portfolios with multi-asset income generation strategies provide some of the best opportunities today. This, combined with personalised advice can help investors ride-out the current market conditions and achieve their long-term goals,” he said.

Outpacing inflation

Based on survey responses, there is an indication that the allocation of equities in Kenyan portfolios will fall from 6.9 per cent to 5.9 per cent in the next year responses. 

This year, gold continued to be of high interest for Kenyan investors, with 43 per cent saying they have invested as a result of inflation, while 57 per cent were interested in sustainable investments because of investor interests and capital, despite persistence concerns of greenwashing.

The research also reveals that 75 per cent of local investors still believe that digital assets are important part of any investment portfolio, despite multiple setbacks this year which saw the crash of the FTX in the US due to a lack of liquidity and mismanagement of funds, followed by a large volume of withdrawals from rattled investors. Currently, 73 per cent of Kenyan investors hold digital assets.

“Looking ahead, 74 per cent of local investors surveyed plan to increase their investments in digital assets in the coming year. This is in part because many said that they consider them to be a good way to diversify their portfolios (42 per cent) and others said that they have seen people make significant returns off digital assets (36 per cent),” the report notes.

The study notes that 35 per cent of Kenyan investors use professional wealth managers, unlike the trend elsewhere in the world, where 62 per cent of those polled said they primarily manage their own finances, with some variation across markets.

“On average, investors taking advantage of professional advice were more likely to have diversified portfolios and higher holdings in sustainable investments,” according to the report.