The Impact of SVB Financial Group on Investor Cash Management
The SVB Financial Group 401(k) and Employee Stock Ownership plan had 19% of its $1.3 billion in assets in company stock as of Dec. 31, 2021, or about $245 million. This amount is not unusual for bank employee retirement plans, as many other companies such as Zions Bancorporation have similar allocations. Unfortunately, the company stock is now essentially worthless after the Federal Deposit Insurance Corp. took over the high-profile venture capital and startup lender on March 10.
Over the past year, due to the SVB crisis, wealthy investors have been increasingly motivated to move their funds from bank accounts to Treasurys and money markets. This is due to the rapid Federal Reserve hikes, which have made Treasurys and money markets now offer a 4% or 5% risk-free return — often double the yield on a savings or checking account. Consequently, affluent investors and family offices have been transferring almost all of their cash reserves into investments that provide higher yields and are usually not reflected on the banks' balance sheets.
0. “SVB, other bank 401(k) plans taking big hit on company stock portfolios” Pensions & Investments, 13 Mar. 2023, https://www.pionline.com/defined-contribution/svb-other-bank-401k-plans-taking-big-hit-company-stock-portfolios
1. “Employer Stock In Your 401(k) Account Can Leverage Your Risks” Forbes, 14 Mar. 2023, https://www.forbes.com/sites/bobcarlson/2023/03/14/employer-stock-in-your-401k-account-can-leverage-your-risks/
2. “Where wealthy investors are putting their cash after SVB collapse” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/where-wealthy-investors-are-putting-their-cash-after-svb-collapse.html