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The rich expect a recession next year — and are hoarding cash

  • More than half of the world's richest families say they expect a recession by 2020, according to a survey by UBS and Campden Wealth Research.
  • Almost half said they are shifting assets into cash, not only to mitigate market risk but also to capitalize on "opportunistic" investments in case of a downturn.
  • More than 90% of private firms that handle money for the ultra-rich think the growing trade war between the U.S. and China will have "major economic implications."  

The world's wealthiest families are girding for a recession by 2020, in part by stocking up on a critical financial asset when times get tough: cash.

That's the conclusion of a new study by investment bank UBS and Campden Wealth Research, which surveyed 360 ultra-rich households with so-called "family offices," or investment firms that are dedicated to managing their personal fortunes. Some of the families cited in the survey, who had an average wealth of $1.2 billion, said they were setting aside cash not only to hedge against a downturn, but also to capitalize on potential investment opportunities. 

"A notable 56% of family office executives are anticipating a recession by 2020," the UBS report noted. "In response, a number of family offices are preparing themselves with safeguards to mitigate loss and/or to strike at new opportunities."

By contrast, many economists remain more sanguine about the economic outlook. That includes UBS' own experts, who wrote in a September 9 report that a recession likely isn't around the corner.

"Although growth is slowing, our base case remains for the U.S. economy to avoid a recession," UBS global chief investment officer Mark Haefele said in the client note.

CBS News poll: Americans split on the future of the economy 04:42

It's not only their extreme wealth that sets the richest families apart, but also their access to various investments. Private equity remains popular, without about 1 of every 5 of their dollars allocated to these investment vehicles. Such buyout funds are typically limited to people with at least $250,000 in spare change to invest and assets of at least $1 million, which rules out most Americans. 

Buyout funds can provide outsized financial rewards, with direct PE investments providing an average investment return of 16% in the 12 months ending in May, the study found. By comparison, the S&P 500 stock index returned about 9% over the same period.

Worries of the ultra-rich

The ultra-rich cited several other concerns beyond the economy, according to the survey — those include the U.S.-China trade war, climate change, and technological issues like hacking and artificial intelligence.

About 94% of American family offices said they believe the growing trade war between the U.S. and China will have "major economic implications." Technology risks are also hitting the wealthy, with 1 in 5 family offices saying they've been a victim of a hacking attempt. But they also see opportunity in tech, with some looking at AI as potentially providing a good investment opportunity. 

Climate change is also on the minds of the rich, although they are taking a money-focused approach. About 1 in 3 family offices are involved in sustainable investing, such as searching for profitable investments in clean energy and water, the study found.

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