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

Michael Sonnenfeldt, Tiger 21 

Scott Mlyn | CNBC

The members of TIGER 21 – a peer network of ultra-high-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 1,200 members with a cumulative $140 billion in assets, and individuals must have at least $20 million in liquid assets to qualify for membership.

Its founder and chairman, Michael Sonnenfeldt, told CNBC on 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 number one 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 ETFs (exchange-traded funds) and index trackers, while technology has been among the most popular sectors. Public equities now constitute 27% 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 on Wednesday after U.S. inflation was shown to have cooled significantly 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%.

This is because they are primarily “wealth preservers” who have sold businesses and live on roughly 2% of their net worth, and therefore use cash reserves to shore up around five years of living expenses, he explained.

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 to 11%. 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% allocation, so that is pretty confident in the long term.”

Source: CNBC