While not all indicators suggest that people are taking refuge in cash, or holding it in unusually large amounts, the US private bank said there's a "wall of worry" that some of its clients, who are UHNW individuals, have to climb over.

Citi Private Bank’s ultra-high net worth clients are waiting for a signal to put cash to work, but for the moment they prefer to sit on cash at levels that appear to be higher than usual. 

Geopolitical volatility and choppy stock markets have encouraged clients of the US private bank to take some chips off the table for the time being, Chris Biotti (pictured below), North America head, told Family Wealth Report in a recent call. 

Chris Biotti

“There is a wall of worry about the geopolitical perspective,” Biotti said. “The average [client] cash position is about double [the normal level]. I think that is significant.”

“They [investors] are waiting for some kind of market correction that they can use for an opportunity,” he continued.

Examples of investors sitting on cash include the Berkshire Hathaway financial and investment group of Warren Buffett holding around $400 billion in cash. Reports said that Greg Abel, the group’s CEO since the start of this year, recently started to dig into the cash pile. The Investment Company Institute said that $3.10 trillion was held in retail money-market funds as at August 12 this year. When institutional holdings are included, the total is $7.93 trillion. When the US Federal Reserve pushed up interest rates in 2022 as inflation spiked after the end of lockdowns, money market funds sucked in money.

Some Citi Private Bank clients are getting lines [of credit] in place at a moment’s notice so that they can deploy capital into the market, Biotti said. This is “opportunistic planning,” he said.

Biotti has been in his post at Citi since May this year, joining from Bank of America Private Bank.

This news service spoke to several wealth sector figures in Asia and the US about the extent of this cash accumulation. 

One senior figure at an Asian wealth management platform told this publication that “there is a lot going on that keeps investors on edge and keeping cash gives them security in these volatile times.” Another investor, US-based, who specializes in real estate, and has his own family office, said he has probably about three times more cash on his balance sheet than before the 2008 recession. “I am sitting on a massive amount of cash,” he said. 

It may be that the desire to hold cash is anecdotal rather than general. On the face of it, UHNW individuals can afford to take a longer-term investment view, so their tolerance for near-term market turbulence should be higher, but it is possible that nervousness is taking its toll on those whose priority is to protect what they have.

A different message comes from the monthly survey of fund managers by Bank of America, which showed that cash holdings, as a share of all investment, fell to 3.6 per cent in July, one of the lowest levels since February this year. US equity overweight positions also rose in July. 

Rockets, IPOs and sports 
Biotti reflected on the SpaceX IPO, and how, from Thursday August 6, 20 per cent of the firm’s stock is no longer locked up and can be traded. (The next lockup release is on August 20.)

“People with significant wealth have 80 per cent of [SpaceX] stock locked up,” Biotti said. Investors may want to take out options positions to hedge positions in the 20 per cent of SpaceX stock that was unlocked, he said. (See a related article about SpaceX's IPO and the restricted liquidity of its stock.)

Biotti said clients are also looking at opportunities such as AI/tech hyperscalers, for example Amazon Web Services, Microsoft Azure, and Google Cloud Platform.

“There is such a tailwind,” Biotti said. 

As FWR has found from interviewing Biotti’s colleagues in areas such as sports finance, UHW individuals are interested in buying and selling sports teams, and capturing revenues from new sports avenues, such as women’s soccer. 

“That is one of the largest growth segments,” he said. “Team owners are looking to expand into other teams and sports.”