Why an exclusive high net worth network is doubling down on stocks, and where the money is going

The members of Tiger 21 – a peer network of ultrahigh net worth entrepreneurs and investors – are putting most of their money to work in the stock market for the first time. Tiger 21 consists of 1200 members with a cumulative $US140 billion ($197b) in assets, and individuals must have at least $US20 million in liquid assets to qualify for membership. Its founder and chairman, Michael Sonnenfeldt, told CNBC overnight Thursday that although real estate had historically been the most popular destination for members’ money, they were now seeing some “real bargains” in the stock markets. This has, in part, pushed public equities to the No. 1 spot for Tiger 21 for the first time since the network’s inception. Sonnenfeldt said members are not focused on stock picking for the most part, so much of the equity investment is channeled into exchange-traded funds and index trackers, while technology has been among the most popular sectors. Public equities now constitute 27 per cent of the membership’s overall asset allocation. “You have a lot of the FAANGs that have come in from much higher prices — they are thinking there is a lot of benefit there, and obviously one of the big areas is energy, not only on the oil and gas side, but much bigger growing interest in renewables and how to play the solar opportunities, the wind opportunities,” Sonnenfeldt told CNBC’s Street Signs Europe. “They know this is the biggest investment theme perhaps in human history, and it is getting a lot of their attention.” After a dismal first half of the year on the back of soaring inflation, tightening monetary policy and recession fears, stock markets have staged a relief rally in recent weeks, and received a further boost Wednesday after US inflation was shown to have cooled in July on the back of a fall in oil prices. Many investors have increased their cash holdings to weather a likely recession. Sonnenfeldt said the cash allocation of Tiger 21 members has historically held solid at an unusually high 12 per cent. This is because they are primarily “wealth preservers” who have sold businesses and live on roughly 2 per cent of their net worth, and therefore use cash reserves to shore up around five years of living expenses, he said. In the short term, Tiger 21 noted that members are using their ample cash to look for deals and inflation hedges. “But they also want resources to pounce on an opportunity and they have been seeing them in increasing numbers, so their cash actually just ticked down from 12 per cent to 11 per cent. It may sound like a small amount, but it probably suggests that members are quite bullish over the long term,” Sonnenfeldt said. “They have recession fears — a majority of our members think that we are going into recession — and still between real estate, public equity and private equity, it is a 76 per cent allocation, so that is pretty confident in the long term.” CNBC