Wealthy investors are not heading for the exits, but they are making sure the door is within reach.

A war in the Gulf that began in late February has pushed Brent crude past US$110 ($157) a barrel, lifted underlying inflation to about 3.6 per cent in both Australia and the US, and led central banks to raise interest rates. US tariffs, US-China rivalry and the war in Ukraine add to the uncertainty. At home, the $3 million super tax is now in force, and the May Budget has put changes to capital gains tax, negative gearing and family trusts on the table, none of them yet law.

For family offices and high net worth investors, the result is a shift in priorities. Liquidity and flexibility matter more, income and defensive assets are in demand, and big structural decisions are being put off until the rules are clear.

Executive leaders at UBS, Escala Partners, HLB Mann Judd, Integro Private Wealth and Pitcher Partners describe how their clients are positioning their portfolios and their families’ affairs.

Zoe Middleton, an investment specialist in the wealth division at HLB Mann Judd, tells CoreData Research the defining feature of the current environment is a search for liquidity. Wealthy investors want more flexibility, and that is changing how they view private markets and private credit.

“Having your money tied up for a long time can make sense when yields are low and you’re getting a return that justifies having your money locked up,” Middleton says.

“Having your money locked up in companies or funds where they could lose their competitive edge over time is something that people are increasingly trying to avoid.”

Clients are also looking for diversification, seeking exposure beyond Australia and “pockets of opportunity away from the AI trade”, including smaller-cap stocks and healthcare. Inflation is also front of mind, with demand for short-duration income assets and inflation-linked sectors such as infrastructure, parts of property and inflation-linked bonds.

“Protecting purchasing power in the face of inflation, and so short duration income assets like term deposits have been sought after,” Middleton says.

Despite the uncertainty, clients are not heading for the exits. “They’re in it for the long-term and just want that liquidity and flexibility to take advantage of opportunities as they arise,” she adds.

That is a large pool of capital. CoreData modelling puts investable wealth held by HNW (high-net-worth) Australian households at $4.6 trillion, up 8.4 per cent on 2025, excluding super and the family home. About 69,000 households hold $10 million or more.

Wealth in Australia is highly concentrated. The World Inequality Database shows the top 10 per cent of households hold 57 per cent of total household wealth. CoreData counts households with $1 million or more in investable assets as part of that top decile.

War, oil and inflation

The Iran war, which began on 28 February, has sharply slowed Gulf oil moving through the Strait of Hormuz, which carried about 20 per cent of the world’s petroleum before the conflict. The disruption pushed Brent crude past US$110 a barrel in mid-October. Higher energy costs have lifted inflation and led central banks to raise interest rates, while US tariffs, US-China rivalry and the Russia-Ukraine war add to the uncertainty.

UBS’s mid-year outlook assumed oil at about US$85, which would let inflation fall gradually. “It turns out the oil price is pretty sticky,” says Andrew McAuley, chief investment officer in UBS Global Wealth Management’s Australian division. Oil prices are still around US$100 as damaged refining capacity in the Middle East and Russia has lifted refiner margins and pump prices.

Underlying inflation is about 3.6 per cent in both Australia and the US, and second-order effects are now appearing with McAuley welcoming the tone from central banks.

“The good news is that central banks are talking a tough game and we need them to be hawkish,” McAuley says, noting recent comments from Reserve Bank of Australia (RBA) deputy governor Andrew Hauser expressing concern that inflation appears worse than previously projected.

The outlook for fiscal restraint is poor. French 10-year government bond yields have moved above 5 per cent, their highest since 2002, and the spread to German bond yields has widened to about 1.5 percentage points, the widest since 2011. There is little appetite in France to rein in spending. In the US, McAuley says “there’s no appetite from either side of politics to reduce spending” ahead of the November midterms.

Will Hauser, a partner and investment adviser at Escala Partners, says investors who are worried about geopolitics are seeking safety and liquidity.

“If investors are worried about geopolitical uncertainty, then we’re generally steering more towards Australian investment grade floating rate that has minimal capital risk and is very liquid, and you’re getting paid well for that at the moment,” Hauser says.

Geopolitical tension reinforces the case for diversification and liquidity; for families with wealth spread across several countries, it also raises structuring questions.

Middleton also sees opportunity in the current geopolitical environment.

“There’s a focus on self-sufficiency, so you’ve got things like reshoring manufacturing, developing sovereign AI capabilities and sovereign defence capabilities,” she says, adding that the trend is also supporting asset classes such as infrastructure.

Where the money is going

Against this backdrop, McAuley says wealthy clients, including family offices and high net worth investors, are leaning towards income and defensive positioning.

“We’re seeing a lot of interest in corporate bonds,” he says. High-quality issuers such as the Magnificent Seven can be paying mid-5 per cent yields, and A-rated corporates sometimes reach 6 per cent.

UBS’s house view is that bond yields are at or near their peak, with another RBA rate rise priced in for Australia and two to three priced in for the US. Clients worried that inflation and cash rates could surprise higher are showing some interest in floating rate notes.

Clients are also looking at alternative income, with McAuley noting that royalties (e.g. pharma, energy, entertainment, sports and brands) are attracting interest.  In infrastructure, clients are increasingly interested in income orientated exposures as opposed to growth exposures with equity risk. These infrastructure income funds aim to “pay 8 per cent year in, year out, no matter what’s happening in the market”.

On other asset classes, McAuley says clients are taking small positions in gold for a range of reasons, one of which is the “de-dollarisation” of the global economy and the US debt situation.

“If the US dollar isn’t as valuable as it used to be, what’s a good store of value? It’s gold,” McAuley says.

Hedge funds are also “having a bit of a time in the sun”, McAuley says, particularly macro and long/short strategies in Australian and international equities.

Integro Private Wealth managing partner Justin Gilmour says the strength of the US market, driven by AI and technology stocks, means investors will look to other equity segments for growth.

“The opportunities for us have been around small companies and emerging markets,” Gilmour says.

He also sees less of an appetite for Australia’s big four banks. “Future earnings outlook is tightening up.”

Jordan Kennedy, a partner in the Sydney private wealth division at Pitcher Partners, says families with a lot of property or trading businesses have built up cash, but diversification into other asset classes has been “slow and probably disproportionate to the balance of the group.”

“The biggest issue is creating diversification for some of these families. They’ve all done something well to result in a large capital appreciation.”

Middleton says corporate credit and fixed income, where higher starting yields are supporting improved returns, have become of interest to clients.

“Listed infrastructure is another asset class that has revenue derived from essential services,” Middleton says.

“They’ve got strong competitive moats and they’re able to generate reliable, often inflation-linked income over time.”

She adds that the sector has exposure to structural growth drivers including electrification, the AI build-out and domestic energy security. Together, the themes point to a client base prioritising flexibility and resilience over chasing the next trade.

Hauser says there is “a bit of reducing Aussie equity exposure” at the margins, noting many clients hold little domestic equity already because of volatility in that part of the market.

Investors worried about geopolitical uncertainty are steering toward Australian investment grade floating rate credit, he said, which “has minimal capital risk, is very liquid and you’re getting paid well for that at the moment”.

Hauser says some clients are rotating out of semi-liquid private markets. Examples include moving from private debt into investment grade credit, and from buyout private equity into value-style global equity. Clients moving from cash into global equities are buying a mix of hedged and unhedged exposure.

With the US 10-year yield pushing above 5 per cent, Hauser says investors cannot easily abandon public equities. “It’s hard to just exit that asset class completely,” he says, though hedge funds that can protect on the downside are one option.

Super and tax planning

Division 296, the “$3 million super tax”, took effect on 1 July 2026 and applies to earnings in FY27 and later years. It adds 15 per cent on earnings attributable to balances above $3 million, and a further 10 per cent above $10 million, for a combined additional 25 per cent in the top tier.

Kennedy says the tax has prompted families to recalibrate their strategy. He cites clients with member balances north of $10 million or $15 million whose children, now in their 50s and 60s, are building their own super.

Withdrawing money to avoid penalties on excess balances, then recontributing it into the next generation’s accounts, let families use those members’ own thresholds.

“A family that pays tax together, stays together,” he says. “That strategic, holistic tax planning is more and more important as the age of the next generation matures to when you would start to have conversations about super with them as well.”

However, Hauser says he’s not seeing clients taking any money out of super, other than for personal or lifestyle expenses.

“We’re not seeing any changes in response to Div 296 at this stage,” Hauser says.

“The modelling I’ve seen done… even if you have balances over $3 million each, then it’s still works out better for them to keep it in super and pay that additional top up.”

Tax changes on hold

The May 2026 Budget proposed several changes that are not yet law. From 1 July 2027, the 50 per cent CGT discount for individuals and trusts would be replaced with inflation indexation and a 30 per cent minimum tax on capital gains.

Negative gearing would be limited to new builds. Properties owned before Budget night would be grandfathered. A minimum 30 per cent tax would apply to family trust distributions, with exemptions for fixed trusts, special disability trusts, deceased estates and charitable trusts.

On domestic policy, Middleton says there is not offer a one-size-fits-all answer. Structures are assessed at the individual level because every client’s situation differs.

“We’re finding scenario planning based on individual circumstances is a good way to figure out what could be best, given the changes that have happened,” Middleton says.

Multi-jurisdiction wealth adds another layer: “When you’ve got wealth across countries, there are considerations of whether you leave it offshore or bring it back to Australia, and if so, how,” she adds.

Although the post-Budget tax legislation is not settled, McAuley says UHNW (ultra-high-net-worth) investors are asking whether the capital gains tax changes mean they should shift towards income, particularly franked income.

“Investors should focus on maximising after-tax return on investments,” McAuley says, arguing that franking is valuable, but the net result is what matters because investors will pay more tax on capital gains regardless.

“A high growth stock that will produce 12 per cent a year for 10 years out of the US, is going to be better than an Aussie stock that’s going to produce 8 per cent, but half of that is franked dividend.”

By contrast, Hauser says wealthy Australian investors are moving away from income-generating assets and toward tax deferral, with the May Budget accelerating the trend.

“They’re not looking for income, they’re not looking for distributions,” he says.

Hauser says the Budget has broadened the shift.

“Prior to the budget we had some of our most sophisticated clients telling us not to worry about income, that they didn’t want their portfolio to generate a dollar of income for them,” he says.

“Post-budget, that’s now cascading down to more and more of our clients.”

Hauser says he hasn’t yet seen any clients move assets between their entities, as they are generally waiting for legislation.

“At the politics or tax reform level, investors that I’m seeing are generally not making any significant changes from a restructuring perspective. They’re waiting until it’s legislative,” Hauser says.

“If proposed rollover relief becomes law, moving assets from trusts back into corporate structures would be next year’s business.”

Gilmour says investors are holding more fixed interest and have less appetite for property because of the May Budget changes.

“They’re leaving some powder dry and waiting for opportunities,” Gilmour says.  “Markets still look relatively fully priced and they’re waiting to see what happens politically.”

It is wait and see on domestic changes, and how they affect clients will be assessed case by case. “Clients are definitely holding and waiting to see what those impacts are once they’re legislated,” Gilmour says.

According to CoreData’s research, half of respondents rank tax their top concern, rising to 66 per cent among those who see their situation as complex. For that group, fairness and family disputes jump from 19 per cent overall to 45 per cent.

Rethinking family plans

Kennedy says uncertainty is slowing decisions among the families he advises. “Long-term strategic plans get challenged in times like this and also retested,” Kennedy says.

Many families built intergenerational targets and allocations to give the next generation a framework, and they are now asking whether those still work in “bad times”.

“Strategic decisions are probably taking significantly longer than they would have previously,” Kennedy says.

Kennedy says “balancing liquidity for uncertainty” is probably the biggest thing he discusses with clients. Families are moving less aggressively and holding more cash back to deploy in better opportunities down the road, so they “can move quicker with agility.”

CoreData research points the same way. In its wealth transfer study, 91 per cent of respondents rated income certainty for the rest of their lives as important to their plans, the highest of any item, while only 32 per cent rated creating a legacy as important.

Kennedy links the caution to the “silver tsunami” of intergenerational wealth transfer. He sees volatility as “the time to pause, recalibrate and re-educate,” bringing younger family members to the table with more responsibility.

This slows decisions, but he says it also acts as “a little bit of a stabiliser” for families that “don’t really want to make decisions but still want to be active.”

The uncertainty is also prompting a return to first principles. Families are questioning whether to default to a trust given the proposed rules in Australia, how to use super, and how to pass wealth on. He says “every family office is going back to the structuring drawing board” and revisiting holistic, long-term estate plans.

Kennedy notes that lower asset values cut against the idea that now is the opportune time to transfer wealth. Valuation matters because of the number of people the wealth must be split among, and it shapes which assets a family can keep together.

His example is a farming family with five children, only two of whom remain on the land. If values fall, those two may struggle to raise the capital or debt to pay out their siblings.

“If [valuations are down] then it just amplifies the problem, whereas if it’s lofty prices it’s easier when it has to be divided up,” Kennedy says.

CoreData modelling estimates about 24,000 farmers holding $44 billion in assets and 51,000 small and medium-sized business owners holding $48 billion that will have to transfer wealth between 2025 and 2043, alongside roughly $1 trillion in housing.

CoreData research also shows how quickly family wealth can fragment. Respondents planning to leave wealth to family members expect about 45 per cent to be saved or invested in the first three years, with 35 per cent going on debt and mortgages.

A further 10 per cent to 20 per cent is expected to go to lifestyle upgrades and one-off purchases, leaving only around half of the transferred amount saved, invested or otherwise remaining in an investible pool.

A pause, not a retreat

What emerges from these conversations is less a retreat than a pause. Clients are staying invested, but they are holding more cash, favouring assets that pay reliable income or can be sold quickly, and looking for diversification beyond Australia and beyond the AI trade. Few want to be locked in for long when conditions can change quickly.

The same caution applies to structure. Advisers say little is moving on the Budget proposals while they remain unlegislated. Scenario planning is being done family by family, and some restructuring, such as moving assets from trusts back into corporate structures, is expected only once rollover relief becomes law. On the super tax the picture is mixed: some families are using the next generation’s own thresholds, while others have found that staying in super still comes out ahead.

Beneath all of it is a generational question. Families are revisiting long-term plans, bringing younger members to the table and asking whether structures built in good times will hold in bad ones. That slows decisions, but it may also steady them.

How long the pause lasts depends on two things outside investors’ control: where oil and inflation settle, and what Canberra ultimately legislates. Until then, clients are leaving some powder dry.