A friend of mine has relatives in Germany who converted some of their not insubstantial family wealth into gold bars and buried them in the woods of Bavaria. This was at a time before negative interest rates so was not a reaction to today’s uncertain global economy, rather mistrust of the financial system in general. Yet it highlights a propensity on the part of the wealthy to hoard that is increasingly frustrating wealth managers.
High-net worth individuals (HNWIs) — people with at least $1m in investable assets — are increasingly shunning equities. In the first quarter of this year, HNWIs held nearly 28 per cent of their portfolios on average in cash, according to the Capgemini World Wealth report. A year previously, that figure was 27.2 per cent.
Overall cash holdings of clients at UBS, the largest wealth manager in the world, are now 26 per cent, according to its quarterly investor sentiment survey — up from 25 per cent at the start of the year. Credit Suisse’s chief executive Tidjane Thiam told analysts in July that clients were holding 29 per cent in cash — albeit a slight dip from 30 per cent at the start of 2019. Wealth managers say the uncertain environment for the global economy and the outlook for equities are why clients are keeping their powder dry. More recently, fears over the trade war between the US and China have led some investors to increase their cash holdings: a third of investors in UBS’s quarterly survey thought the skirmishes could last a year or longer, and while 45 per cent thought diversifying their portfolio was the best solution to a prolonged trade war, 37 per cent said holding cash was the answer.