In a significant shift within financial markets, Berkshire Hathaway, under the leadership of Warren Buffett, has emerged as the dominant private owner of U.S. Treasury bills, even exceeding the Federal Reserve's substantial portfolio. This strategic accumulation, totaling approximately $305 billion in Treasury bills by the close of the first quarter of 2025, highlights Buffett's calculated approach to navigating the prevailing investment climate.
Treasury bills, or T-bills, are short-term government debt instruments with maturities ranging from a few weeks to a year. They are recognized for their low risk, backed by the full faith and credit of the U.S. government, and are typically sold at a discount, with the investor receiving the full face value at maturity. This makes them ideal for managing considerable cash reserves due to their ease of transaction and minimal default risk.
Berkshire Hathaway's T-bill holdings, which represent about 5% of the total $6.15 trillion T-bill market, have doubled from the previous year. In contrast, the Federal Reserve has been systematically reducing its T-bill assets as part of its balance sheet adjustments, concentrating more on longer-term Treasury securities and mortgage-backed instruments. Buffett's preference for T-bills stems from their inherent safety and high liquidity, providing a secure haven for capital when stock market valuations are high and global economic growth remains uncertain. Furthermore, the attractive short-term interest rates, consistently above 4%, allow Berkshire to generate billions in interest income annually with almost no credit risk. This substantial cash position also offers Berkshire the agility to act swiftly and decisively when significant acquisition opportunities or market disruptions arise, a principle Buffett has often emphasized. He stated at the 2025 annual meeting that such a cash reserve would prove invaluable when compelling deals materialize.
This notable position in T-bills, now surpassing that of major financial institutions and central banks, underscores a crucial lesson for investors: the enduring value of liquidity and the wisdom of refraining from chasing risky assets during periods of inflated valuations. It is a testament to the prudent management of resources and the foresight to preserve options for future strategic investments.