When COVID hit, cash was king. But that didn’t last

There was a big shift into cash last year among high-net-worth investors. But as markets bounced back, allocations returned to near-normal

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When the COVID-19 pandemic started ripping through world economies a year ago, many high-net-worth investors looked to the adage that in uncertain times, cash is king.


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Today, the crown is not as firm. Although the pandemic is certainly still with us, cash appears to be losing its grip among the super-wealthy.

“There was a notable shift into cash last year among our investors. We had never seen anything like it,” says Leon Goren, chair of Toronto TIGER 21, part of a global peer membership network of high-net-worth investors, entrepreneurs and executives.

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The average TIGER 21 member holds $100 million in assets. The network publishes a quarterly analysis of its members’ asset allocations and in August 2020, saw what Goren described then as “a massive effort to preserve their capital.”

According to the group’s quarterly asset analysis at that time, TIGER 21’s members were allocating about 19 per cent of their assets in cash during the summer of 2020.

“It was notable because with high-net-worth investors, you don’t usually see that kind of massive allocation of assets. Our members look long into the future,” Goren told the Financial Post.

The trend toward parking assets in cash has waned since then, with cash allocations returning to more traditional levels of between 11 and 13 per cent by the fourth quarter of 2020, according to the network’s asset allocation report for that entire year.

“Members have eased back into investments in areas where they have traditionally allocated their assets,” TIGER 21’s Q4 2020 report said.


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“It’s still at around 13 per cent. What I think we’re seeing now is an easing of some of the uncertainties about the economy,” Goren said.

“It’s a percentage that still allows high-net-worth investors to be protected, but it also gives them room to invest if things do retract again in the marketplace and prices become lower,” he says.

The shift to cash last year was triggered partly by sudden apprehension about the economy after world markets crashed between February and April 2020, when the COVID-19 pandemic tightened its grip.

Markets have recovered and by some measures, even soared since then, as more get vaccinated and many countries and regions ease restrictions on travel and gathering in offices, homes and public spaces.

It was notable because with high-net-worth investors, you don’t usually see that kind of massive allocation of assets. Our members look long into the future.

Leon Goren, chair of Toronto TIGER 21

But it is not necessarily wise to assume that the global economy is out of the woods yet, says John De Goey, portfolio manager at Wellington-Altus Private Wealth in Toronto. And if the recovery is shaky, it can still make sense to have a higher cash allocation, he says.

“There’s virtually always a predominant view in the investment industry that the markets are going to go up. It makes sense, because how could you persuade people to invest at all if you predict the markets will go down or sideways,” he says.

“But some people — and I am one — have the view that since the beginning of this year, the markets are expensive,” De Goey explains.

True, high-net-worth and other investors who took the cash they had been storing in 2020 and put it into equities and funds in 2021 have done spectacularly well — so far.


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“But my view is that the run-up in the markets that we have seen so far this year is not likely to be sustained much longer,” De Goey says. While there may well be more profit to be had in the current market run-up, it’s not eternal, “so going to cash is not a huge risk,” he adds.

TIGER 21’s Q4 asset allocation report in 2020 showed that by the end of the year, its members had 27 per cent of their holdings in real estate, 26 per cent in private equity, 22 per cent in public equities, 3 per cent in hedge funds and 7 per cent in fixed equities. While the 13 per cent they now keep in cash is consistent with traditional levels in their portfolios, Goren acknowledges that one of the big questions is around inflation.

“The thing about inflation is that no one really knows what’s going to happen with inflation — our members are split about it and even the economists haven’t reached a consensus,” Goren says.

In June, inflation in Canada eased to 3.1 per cent annually, according to Statistics Canada, lower than a median forecast of analysts who were polled by Reuters but still above a 2-per-cent target considered healthy for growth by many economists. The Bank of Canada predicts that inflation will remain above 3 per cent at least for the rest of this year, possibly easing back toward 2 per cent in 2022.

That doesn’t offer much guidance for high-net-worth investors wondering what to do with their cash, Goren says.

“You can’t time getting in and out of cash any more than you can time getting in and out of the market,” he says.

“If you look at the patterns of investment that high-net-worth families tend to follow, they don’t tend to go in and out of cash or markets,” he says. Last year’s rush to cash was exceptional.

“Generally, they take the longer view. If you look at the S&P index over time, there may be dips, but over the long term, it goes up.”

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