Many investors are looking for alternative investment products and strategies that might provide a greater return on investment than standard investments which have their returns tied to the going interest rates. The portfolios of wealthy investors increasingly include alternative investment products such as hedge funds, private equity, venture capital and precious metals .
According to the Spectrem Group report, investable assets represent a sixty-four percent of the total assets of most $25 million plus households. The percentage of alternatives held by UHNW households is twenty-nine percent of their investable assets.
Twenty-five million plus households own different hedge funds and venture capital investments (43 percent). The largest percentage of investors own a long short hedge fund at 34 percent, while liquid hedge funds are owned by 29 percent. Market neutral, event driven and other hedge funds are all owned by about a quarter of $25 million plus investors. More than half of those households hold private equity investments (53 percent).
Among the $25 million plus households investing in alternatives, more than 40 percent own three more hedge funds and 19 percent say they own six or more hedge funds. Eighteen percent say they have one hedge fund and 28 percent have two. Just over a quarter worry about their assets in hedge funds being frozen and just under half have more assets in their hedge funds now than in the past.
Twenty-six percent of the $25 million plus households used a Full Service Broker as their primary advisor, while 16 percent use an Independent Financial Planner. Only a very small percentage of these wealthy households do not use a financial advisor. Full service brokers remain the most common advisor type. Investors tend to rely upon their advisors for hedge fund investments as well as more specialized bonds and mutual funds.
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