The Asset Class Buffett Owns That You Probably Don't

Key Takeaways

• Berkshire holds $339 B in 3‑month Treasury bills.
• T‑bills yield 3.69% annualized, tax‑exempt at state level.
• High‑yield savings lose to T‑bills after state taxes.
• SGOV ETF offers similar yield with 0.09% expense ratio.

Pulse Analysis

In a market where equity valuations are stretched and bond yields remain volatile, the way large institutions manage cash can offer a blueprint for individual investors. Berkshire Hathaway’s decision to allocate over $339 billion to three‑month Treasury bills reflects a preference for assets that combine near‑zero credit risk, negligible duration exposure, and immediate liquidity. This approach allows the conglomerate to earn a market‑linked return—currently around 3.69% annualized—while keeping capital ready for opportunistic deployments when price dislocations emerge.

The tax advantage of short‑duration Treasury bills is a critical, yet often overlooked, component of their attractiveness. Because interest on these bills is exempt from state and local taxes, the effective after‑tax yield frequently surpasses that of high‑yield savings accounts, especially for investors in high‑tax states such as California, New York, or Massachusetts. Moreover, unlike bank deposits that are limited to $250,000 per institution under FDIC insurance and can be subject to sudden rate cuts, Treasury bills are backed by the full faith and credit of the U.S. government and trade in the deepest market on the planet, eliminating both credit and liquidity concerns.

For practitioners seeking to emulate Berkshire’s cash strategy, two practical pathways exist. Direct purchases through TreasuryDirect provide a fee‑free, government‑sourced avenue, while exchange‑traded funds like iShares’ SGOV deliver similar exposure with the convenience of brokerage execution and a modest 0.09% expense ratio. Investors can further enhance returns by laddering maturities to capture incremental yield gains without sacrificing monthly access. Integrating short‑duration Treasuries into a diversified portfolio not only improves after‑tax cash yields but also preserves capital for future strategic investments, reinforcing cash’s role as a dynamic, value‑adding asset class.