Soul Patts has 20% in cash. Todd Barlow says everything else has to earn its place

For years, investors have obsessed over the enormous cash pile amassed by Warren Buffett – and now overseen by his successor, Greg Abel – at Berkshire Hathaway.

In investing circles, Berkshire's war chest has become something of a barometer of opportunity and risk: when one of the world's greatest capital allocators is sitting on hundreds of billions of dollars, investors inevitably wonder whether markets are overvalued.

As of its latest result, the US$1 trillion-plus investment giant was sitting on around US$365.5 billion in cash and equivalents.

Australia's own answer to Berkshire is wrestling with a similar question.

Washington H. Soul Pattinson (ASX: SOL) has around 20% of its $16 billion portfolio sitting in cash, and CEO Todd Barlow isn't feeling any pressure to spend it.

Speaking at Livewire Live 2026, Barlow pointed to the dramatic increase in risk-free rates over the past five years.

“In Australia, if I look at the last five years, the 10-year rate today is about 5.3%. Five years ago, it was under 1.5% ... we are in a different environment now," he said.

And that has fundamentally changed the hurdle rate for taking risk.

“We're now getting paid for riskless cash, and whatever risk that we're taking on top of that, we need to get paid for and we need to make sure that we're appropriately compensated for taking the risk.”

When cash is paying investors handsomely to wait, everything else has to work considerably harder to earn its place in the portfolio. As Barlow quipped, Soul Patts has effectively been getting the same returns as Australian equities without the roller coaster ride.

“We're getting paid basically the same as what the [Australian] equity market is doing, but taking no risk and having complete liquidity.”

20% cash ... and no rush to spend it

Barlow stressed that Soul Patts' cash pile isn't simply money waiting to be invested.

“We've got a big cash allocation, which is not a parking spot. It's a deliberate allocation to take risk off and to have that liquidity there for opportunities that might present themselves if there is dislocation," he said.

Barlow isn't predicting an imminent crash, although he acknowledged it “does feel like we are late cycle” and recessionary pressures are present.

Soul Patts' short-duration, AA-rated book is earning around 150 basis points above the cash rate. But Barlow said the investment house doesn't work to predetermined asset allocations. The 20% position is simply a byproduct of the opportunities it is – or isn't – finding.

And the more risk Soul Patts takes, the more it demands in return. Barlow said it might accept returns of around 10–11% from lower-risk investments, while its private company portfolio targets an internal rate of return of above 20%.

“You need to think about what is the return that you're getting for the risk that you're taking. You can't have a change in the risk-free rate and not have a change in your view about whether you're being compensated for your particular investment opportunities.

From 90% equities to 40%

That cash position forms part of a much bigger transformation.

Five years ago, listed equities represented roughly 90% of the Soul Patts portfolio. Today, that figure is closer to 40%, as the investment house has expanded into private equity, private credit and other assets.

“In the last five years, we have felt that it is appropriate to de-risk an equity-centric portfolio into one that is more multi-asset," Barlow said.

Last year's acquisition of Brickworks accelerated that shift, effectively moving a large chunk of listed equities exposure into Soul Patts' private equity portfolio.

But Barlow said the strategy is also something of a return to the company's roots.

“We've also had a desire for us to get more uncorrelated returns, and it's also us returning to our roots. We made a lot of money back in the day in private assets.”

He pointed to New Hope and TPG as businesses Soul Patts originally backed privately before they eventually listed.

Staying inside its circle of competence

There was also a refreshingly candid admission about one of the biggest investment opportunities Soul Patts missed: US technology.

“So much of the market in the US has been lifted by the growth of tech stocks that we are just not traditional investors in. That's not to say that we don't believe in it, it's just not something that we're good at," Barlow said.

Rather than chase areas where it lacks expertise, Soul Patts sticks to areas where it believes it has an edge.

Private credit is one example. Despite Barlow estimating real estate development accounts for 50–60% of Australia's private credit market, Soul Patts has zero exposure to it.

Instead, it targets bespoke lending opportunities to Australian companies seeking alternatives to bank or equity financing. Barlow said the private credit portfolio has returned around 14% per annum over the past four to five years, while sitting ahead of equity holders in the capital structure.

Stop obsessing over stock picking

Perhaps Barlow's most useful lesson for individual investors came during the audience Q&A.

“Asset selection – what to invest in, where to invest, when to invest – are all much more meaningful decisions to your overall outcomes than stock selection," Barlow said.

Instead, Barlow urged investors to understand where they have an edge and adapt their portfolios as the investment environment changes, and right now, that discipline has led it back to one of the simplest assets of all: cash.

Cash may traditionally be viewed as trash, but when investors are being paid handsomely to wait, sometimes the best investment decision is recognising when you don't need to take more risk.