CNBC Writes: Rich families are hoarding cash: Citi

 

A new survey of family offices by Citi finds that the wealthy are cash heavy-meaning they may fall short of the investment returns they’re expecting.

Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

Most of the families surveyed expected interest rates to rise. About 60 percent projected long-term market rates to rise 50 basis points and 17 percent said they would increase 100 basis points or more. Just 2 percent expected U.S. rates to fall.

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While not always the case, the rich are typically more savvy when it comes to investing and/or managing money. They typically have a better understanding of the economy and the financial markets.  So, why are they hoarding so much cash?

Maybe they are following my advice (to accumulate as much cash as possible) or maybe they are simply aware of what is going on in our economy and our financial markets. They look around and they realize that all major asset prices (stocks, bonds and real estate) are way overpriced.  Maybe they have a hunch that the only direction interest rates can go is up. Maybe they have a clear understanding that when the interest rates do go higher, it will have a severe negative impact on the overall economy.  As such, they hoard as much cash as possible to A. Prevent downside and to B. Have it available when lower prices present themselves.

Don’t believe me? Find the richest person you know and ask them. 

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