Rich families are hoarding cash

A new survey by Citi shows that wealthy families only have 25% of their assets in stocks. Most expect interest rates to rise.

By MSN Money Partner Nov 5, 2013 2:51PM
Image: Wealthy couple celebrating in a car (© Image Source/Getty Images)By Lawrence Delevingne, CNBC

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.

Stocks represented about 25 percent of portfolios on average. Bonds were about 17 percent of the asset mix and various classes of less liquid and alternative investments amounted to 19 percent.

"Using these weightings, our own return expectation for the portfolio. . . comes to just 4.4 percent. This matches what we at Citi Private Bank observe generally among high end investors: very high cash holdings, with a current asset allocation unlikely to achieve return targets," Steven Wieting, the bank's global chief investment strategist, wrote in a recent client note.

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.

The families were also asked if U.S. stocks were more likely to rise or fall 10 percent over the coming year. Some 65 percent expected a gain.

"What does this all suggest?" Wieting asked. "In our view, under-invested bulls."

All of Citi Private Bank clients are worth at least $25 million and the unit oversees about $270 billion in combined assets.

A similar survey of ultrarich investors was more optimistic.

Members of Tiger 21, an information-sharing network for investors with a median net worth of $75 million, haven't reduced their healthy allocation to bonds and equities and they hold relatively little cash, according to a recent survey of portfolio positioning in the third quarter.

Citi is more bullish than its clients.

"Our own future equity return expectations are positive, but well short of the pace seen over the past five years as market valuations are now far from depressed. However, in the recovery to date, investors have doubted the sustainability of huge profit gains seen at the start of the U.S. rebound," Wieting said.

"Our interpretation of the current market pricing is that in the years ahead, U.S. equity markets can likely absorb a gradual rise in risk-free interest rates, assuming the source of the rise is increased growth expectations, or alternatively, confidence in the sustainability of growth."

More from CNBC

Nov 5, 2013 4:48PM
I don't think the rich are very convinced that this recovery is as good as what they are being told it is.  I don't think we're in as much of a recovery as the media is trying to tell us. I am not seeing it in my day-to-day.

There is still much uncertainty not only in the market but in what the government will do next. I don't blame them for holding back under those conditions.

They didn't become rich by being stupid, and they're not staying rich by being stupid either. Even if they inherited their wealth, those before them certainly didn't make and keep their wealth by being stupid.
Nov 5, 2013 4:31PM
I use to give to charity now I give nothing. obama is taking my extra money I have none left.Take from the rich and give to the slugs.who don't care as long as they get it for FREE. Thats why monorities vote democrat. Wake up working class
Nov 5, 2013 4:33PM

With super socialist spread the wealt obama as president do you blame the wealthy for hoarding cash? Everything he puts his hand to turns to sh!t. He is a sh!t president.

Nov 5, 2013 4:42PM
If we keep electing Socialist Democrats, you will see this trend continuing.  The Tax Happy Limo Liberals keep finding new ways to dictate , control and tax your life.  We need to change this or this country will be in a heap of trouble.
Nov 5, 2013 5:02PM
How dare they hoard their own money. This is America, I want some. I will immediately contact my senator to pass a law so I can have my share.
Nov 5, 2013 4:27PM

I gained 23% this year in the market, so I got out. 20% tells me something is wrong, because I am not that smart or lucky.

Nov 5, 2013 5:04PM

Watch out!  Obama and his Obamazombies will find the cash and take most of it.


Obama-biggest liar since Nixon, worst president ever.

Nov 5, 2013 5:18PM
Perhaps this trend suggests that the more wealthy are preparing for the worst (market downturn, tax increases, etc.). 
Nov 5, 2013 5:06PM
How long will people continue to work when taxes take a larger and larger share of their income. We pay more than fifty percent of our income in taxes and they are considering implementing tolls that will tax us an extra $20,000 per year.

When Democrats are in power... hold on to your wallet. Tax and spend is all they know how to do. We are going to retire so they won't have 50 percent of our income to frivolously give away to lazy people. Democrats have no idea how to create a job.
Nov 5, 2013 5:19PM
The rich have 25% in stocks, 17% in bonds and 19% in other investments.  That leaves about 40% in cash.  Why pour a bunch into stocks right now when they are trading near all-time highs?  Same with bonds.  70% of all millionaires are self-made.  Second guess them all you want to, but most  didn't get there by being stupid or frivolous. 
Nov 5, 2013 5:14PM
Yes, according to Citibank, these people are stupid.  That's why they are wealthy.  
Nov 5, 2013 5:48PM

I am hoarding cash, gold, food and ammo.


My neighbor is whoring for cash, gold, food and ammo.


If things get desperate we'll probably come to some sort of an arrangement.

Nov 5, 2013 5:40PM
so what!! I don't blame them. It's their money...they can choose what they do with it.
Nov 5, 2013 5:21PM
They're hoarding cash because they know they'll be spending a s***load more on health care from now on.
Nov 5, 2013 5:40PM

Why do people over-react to ephemeral news and ignore the fundamentals?


1929 clearly taught us that when banks and brokers cross roles, people savings get ruined.


The deregulation in the eighties set the stage for the abuses in 2004-8.


Now, we really would benefit from major investing in American corporations, but only foreigners seem to realize how valuable American corporations really are.


Time to ignore the "pundits" and industry insiders who spread gossip.  Find an industry you know and can understand.  make sure it is an industry that is not being phased out.  Pick the market leader.  Invest and let it sit ten years or more.


Pundits are paid to give bad advice.  No one would pay them to tell the simple truth.

Nov 5, 2013 5:19PM
Nov 5, 2013 4:39PM
Nov 5, 2013 5:37PM
So, the fed policy is not working!  How many years already?
Nov 5, 2013 5:46PM
one thing for sure, it doesn't trickle down very fast!
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