A new survey of family offices by Citi finds that the wealthy are cash heavy—meaning they may fall short of the investment returns they're expecting.
Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.
Stocks represented about 25 percent of portfolios on average. Bonds were about 17 percent of the asset mix and various classes of less liquid and alternative investments amounted to 19 percent.
"Using these weightings, our own return expectation for the portfolio … comes to just 4.4 percent. This matches what we at Citi Private Bank observe generally among high end investors: very high cash holdings, with a current asset allocation unlikely to achieve return targets," Steven Wieting, the bank's global chief investment strategist, wrote in a recent client note.
Most of the families surveyed expected interest rates to rise. About 60 percent projected long-term market rates to rise 50 basis points and 17 percent said they would increase 100 basis points or more. Just 2 percent expected U.S. rates to fall.
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The families were also asked if U.S. stocks were more likely to rise or fall 10 percent over the coming year. Some 65 percent expected a gain.
"What does this all suggest?" Wieting asked. "In our view, under-invested bulls."
All of Citi Private Bank clients are worth at least $25 million and the unit oversees about $270 billion in combined assets.
A similar survey of ultrarich investors was more optimistic.
Members of Tiger 21, an information-sharing network for investors with a median net worth of $75 million, haven't reduced their healthy allocation to bonds and equities and they hold relatively little cash, according to a recent survey of portfolio positioning in the third quarter.
Citi is more bullish than its clients.
"Our own future equity return expectations are positive, but well short of the pace seen over the past five years as market valuations are now far from depressed. However, in the recovery to date, investors have doubted the sustainability of huge profit gains seen at the start of the U.S.rebound," Wieting said.
"Our interpretation of the current market pricing is that in the years ahead, U.S. equity markets can likely absorb a gradual rise in risk-free interest rates, assuming the source of the rise is increased growth expectations, or alternatively, confidence in the sustainability of growth."
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—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.