Billionaires sitting on growing piles of cash

Still jittery over the 2008 market crash, billionaires are hoarding mountains of cash – $600 million on average – hoping to have it on hand for a good investment opportunity, and perhaps signaling to ordinary people what to do with their money.

Over 2,300 billionaires worldwide, worth $7.3 trillion total, are sequestering record amounts of cash – each holding $600 million on average, or 19 percent of their net worth, says a new report by the Wealth X and UBS. The amount represents an increase of $60 million in cash per billionaire from a year ago, and wealth followers say it’s a sign that the ultra-wealthy are nervous about putting more money in today’s markets.

“This increased liquidity signals that many billionaires are keeping their money on the sidelines and waiting for the optimal moment to make further investments,” the study said.

Wealth managers are often asked by these families what they should do with the cash.

“The apparent safety of cash, reinforced by the painful psychological experience of the 2008-09 global financial crisis and the subsequent troubles within the European Monetary Union, likely reinforces the tendency to favor this cautious allocation strategy,” said Simon Smiles, CIO of UBS Wealth Management, in the report.

The Billionaire Census found that with cash holdings at 19 percent, billionaires are only investing a fifth of their wealth in real estate. As many billionaires are entrepreneurs, almost half their wealth is invested in private holdings and 28.9 percent in public holdings.

There are 571 billionaires in the United States, but eight of the top 20 now are in Asia. On average it takes 45 years to become one, argues the study. Eighty-one percent are self-made, and 35 percent have no university degree.

The number of billionaires is likely to increase to 3,800 by 2020 when wealth is transferred to the next generation.

“The combined wealth of the world’s billionaires is now higher than the combined market capitalization of all the companies that make up the Dow Jones Industrial Average,” reportedthe Financial Times.

And UBS’ Smiles said that the large cash holdings aren't specific to billionaires – millionaires and multimillionaires are also holding cash hordes, on the order of 20 percent to 30 percent of their net worth.