Ultra-wealthy investors aren’t bullish on the markets but they are well positioned to “weather the storm,” according to Michael Sonnenfeldt, founder of investment club Tiger 21.
In the third quarter, Tiger 21 members moved more capital into real estate and private equity, according to its latest asset allocation report. The network, which is made up of more than 600 entrepreneurs from every industry, has $60 billion in assets.
Real estate accounts for 28 percent of its allocation, while 24 percent is in private equity.
“You want to be defensive, but in a low-risk environment you still have to take risk. So you are going to take risk where you have expertise: owning buildings, building small businesses,” Sonnenfeldt told CNBC’s “Power Lunch” on Thursday.
Members have also cut back on fixed income, only 9 percent of the club’s allocation, because of concerns about rising interest rates. It has 23 percent of its money in public equities, 5 percent in hedge funds and 10 percent in cash.
Sonnenfeldt said the members meet and try to figure out what is happening in the markets, businesses and the economy, and they’ve noted a shift from monetary policy to fiscal policy.
However, “normally when you have that shift, and the market always gets choppy when that happens, you don’t have a trillion-dollar deficit against wanting to have more infrastructure,” he added. “One or the other wins out. So when you add that and China … our members are concerned.”
When it comes to investing in public stocks, the wealthy turned to names such as Apple, Amazon, Facebook and Berkshire Hathaway.
While tech has taken a beating lately, Sonnenfeldt said tech stocks are “unique because of their scalability.” Amazon, which fell into bear market territory earlier this week, is still up 37 percent year to date. Apple, which also tumbled into a bear market on Wednesday, is up more than 12 percent so far this year.
Sonnenfeldt called Apple “rock solid” and said of Amazon, “Where else can you get a shopping center on a desk? It’s still the best place to do it.”
However, he conceded that Facebook is now facing some headwinds thanks to recent hits to its reputation and the possibility of regulation. On Wednesday, The New York Times released a bombshell report that detailed how the company avoided and deflected blame around its handling of Russian interference in the U.S. election and other problems.
When it comes to Tiger 21’s favorite sector, health care is the “gift that keeps on giving,” Sonnenfeldt said.
“If you cure cancer, in good times and in bad, you’re going to have a winner,” he said.
Plus, there is “huge wealth” in the U.S. and people will pay to improve the quality of their lives, he said.