Rate cuts heighten reinvestment risk for wealthy clients

Investors must seek growth in equities, crypto, and diversified strategies.

Singapore’s wealthy are being forced to rethink their investment strategies as falling interest rates drive reinvestment risk, according to DBS.

Rohit Meena, Managing Director and Head of FX and Commodities, Wealth Management Solutions, Global Financial Markets at DBS, said rate cuts are reshaping how clients approach wealth preservation and growth. “We have seen overnight that the FOMC reduced the rate, and we are expecting the rate cuts to continue. So the reinvestment risk becomes real for clients who have not been so invested in the markets and have been on the fence and been investing in assets like money market funds, fixed deposits, T-bills, which was quite popular in the last couple of years,” Meena explained.

To address this, DBS is guiding clients to shift away from low-yielding safe havens. “We are helping those clients to move out of the assets where there is a reinvestment risk and get into markets to enjoy the structural tailwinds,” Meena said.

At the same time, broader uncertainty continues to weigh on sentiment. “One of the key challenges that we are seeing, and this comes up in conversation with our wealthy clients very often, is the geopolitical landscape. We all know that we are in the VUCA world, which is volatile, uncertain, complex and ambiguous. And we feel that this year, this VUCA unpredictability, has gone up a notch,” he added.

Despite the turbulence, investors are increasingly turning to growth-oriented and diversified strategies. “On the asset side, there is no denying that this has been an equity year. We have also seen that the crypto market has come of age. We have seen a lot of interest from our AI clients in our crypto offerings and structures,” Meena said.

He noted that diversification has accelerated, particularly in FX and commodities. “Currency linked investments, where the volumes this year have gone up by 35%, and gold and precious metal linked investments as well. The entire product suite in precious metals, again, has taken off more than double the volume compared to last year,” he said.

Looking ahead, DBS is experimenting with new tools to help clients respond quickly to shifting markets. “We are doing a lot of experiments with the agentic AI. We do see a long runway for this new technology,” Meena said. The bank expects AI to play a role in synthesising market insights, delivering hyper-personalised solutions, and enabling clients to capture fleeting opportunities.