The wealthier the investor, the larger his (or her) investment in alternative assets.
That's the conclusion of a new Spectrem Group report—Use of Hedge Funds and Private Equity in the Portfolios of the Wealthy—which examines the ownership and sourcing of hedge fund investments, as well as the use of private equity.
The report concentrates on investors with a net worth over $5 million and is based on two surveys: Spectrem’s $25 Million Plus Investor 2014 survey, which polled 196 individuals in June of 2014; and the 2014 UHNW Investor ($5MM-$25MM), an online poll of 455 respondents.
The study found that hedge funds receive more money from alternative investors—particularly those with a net worth of $25 million or more—than any other class of alternatives.
The average investment for the $25 million investor ranges from $3.5 million for private placements to $12.6 million for hedge funds.
Ownership of alternatives increases with an increase in wealth and decreases with increasing age.
While 42% of investors with a net worth over $25 million own hedge funds, 69% of investors with a net worth of $125 million or more are invested in hedge funds.
“Utilization of alternative investments increases as wealth increases, and advisors should recognize the opportunity to introduce alternative investments as an investor’s net worth grows,’’ says George H. Walper, Jr., president of Spectrem Group, in a statement. “Investors who find alternatives attractive are looking for a higher rate of return and a diversified portfolio of investments.”
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