Ultra-high-net-worth investors are shifting more of their portfolios toward either public or private equity, according to two recent surveys.
The asset-allocation report for the fourth quarter of 2012 for Tiger 21, a peer-to-peer network for investors with between $10 million and $100 million in investible assets, found that members allocated 19% of their assets to private equity, up from 13% a year earlier.
Tiger 21 members tend to have created their own wealth, says founder Michael Sonnenfeldt, and they’re searching for ways to generate returns in a low-interest rate environment by going back to how they made money through building companies.
The survey found that members allocated 24% of their portfolios toward public equities, or stocks, compared to 21% a year earlier. The total was the highest level allocated toward stocks since the first quarter of 2011. This shift is emblematic of what’s happening across the high-net-worth investor space as the economy becomes more stable, jobs “creep back” and investors feel more comfortable, says Sonnenfeldt. Still, allocations to cash and its equivalents totaled 12% in the fourth quarter, a sign that investors are keen to have a buffer against another financial crisis, he says. Allocations to hedge funds decreased to 7% in the fourth quarter of 2012 from 9% a year earlier, while allocations to fixed income decreased to 14% from 16% a year earlier. In another corner of the high-net worth space, investors are plowing into stocks and cash instruments.
According to market research firm Spectrem Group’s recent survey, 71% of respondents with between $5 million and $25 million in net worth, not including a primary residence, will invest or invest more in equities over the next 12 months, up from 52% in 2010. Some 51% of respondents said they plan to invest or invest more in cash-based instruments over the next 12 months. “Wealthy investors remain cautious because of the ongoing economic and political uncertainties. As a result, they are balancing their increased exposure to equities by retaining a sizable amount of cash,” George H. Walper Jr., Spectrem’s president, said in a statement. The 2012 UHNW Investor report was completed in winter 2012 and surveyed 537 respondents.