What is smart money doing? It is often assumed that smart money is rich, and everyone wants to know what they are doing. Tiger 21 is a loose club or network of wealthy individuals who share investment idea. It is hard to say they represent the elusive smart money, but their allocation decisions provide some data on what is happening to wealthy portfolios.
The Tiger 21 latest survey for the second quarter shows a relatively large increase in cash holdings from 10 to 12%. This is the highest level in years. Cash yields on Treasury bills are also at multi-year highs and the yield curve is slightly inverted so the cost of holding cash is low.
Investors are acting rational. If there is a high degree of investor uncertainty and cash rates are attractive, increasing cash levels makes sense. If this allocation is representative what other smart money may be doing, demand for risky assets will decline. Without new money flows, it is harder for risk-on assets to move higher.