Affluent Americans look
to alternative assets
By IR Web Report staff
A study of high-net worth
American investors finds that they have boosted
their exposure to alternative investments like
hedge funds and are holding historically high
amounts of cash.
The study by Northern Trust of 1,014 high net
worth households with $1 million or more of
investable assets, found that 70% have some
exposure to alternative asset classes, including
hedge funds, private equity and real estate.
Currently, they hold about 18% of their assets
in alternative asset classes.
In the year ahead, most affluent investors
are not planning on making any major structural
changes to their portfolios. However, 34% of
high-net worth investors in the study will likely
allocate at least some new savings to alternative
investments, while 19% of millionaires in the
study say they plan to increase their
allocations to alternative assets.
| |
$1 MILLION+ INVESTABLE ASSETS SNAPSHOT
• Defined as $1 million + investable
assets which doesn’t include principle
residence and retirement plans
• Represents 4.8 million households
in the U.S. (mid-year 2005)
• Percent of the affluent market: 20%
• Average age: 55
• Average investable assets: $3.375
million
• Average Net Worth (NIPR): $4.646
million
• Average Total Assets: $5.584 million
• Average Household Income: $209 thousand
• Employed full time: 45% Retired:
34%
• Own Business: 24%
• Own Professional Practice: 13% |
At the same time, affluent investors currently
have 13% of their portfolios allocated to cash
while one in five plans to increase their allocation
to cash in 2006. The study also finds that 22%
will likely increase their allocations to international
equities and bonds.
The study, called "Wealth in America,"
found that 68% of high net worth investors are
oriented toward preserving their wealth as opposed
to growing it further. Their overall expectations
for market returns in 2006 are just 6%, below
historic norms.
Among $5 million+
households
Wealthier households, those with $5 million
or more of investable assets, have higher portfolio
weightings in alternative assets than the overall
study group (26% vs. 18%) and less emphasis
on U.S. equities and bonds.
Wealthier households also have larger percentage
allocations in cash compared with the overall
group: 16% vs. 13% for the overall group.
Almost half (48%) plan to put at least some
new savings into real estate, private equity
and hedge funds this year. Meanwhile, 26% said
they will likely increase their allocations
to alternative investments and 25% said they
plan to increase their cash position.
Among younger millionaires
Millionaires age 35 and under place greater
weighting on alternative asset classes and less
weighting on U.S. equities and bonds, the study
finds. About 27% of their portfolios are currently
allocated to private equity, hedge funds and
real estate, and they hold 19% in cash.
Younger millionaires in the study are apparently
most bullish about allocating new savings to
alternative assets. Exactly 66% plan to add
at least some monies to these asset classes.
However, 71% expect to add at least some new
savings into cash, while half will likely allocate
at least some new money to bonds.
The nationwide study of households with self-stated
$1 million or more in investable assets, conducted
for Northern Trust by Phoenix Marketing, seeks
to highlight the issues of importance to affluent
consumers. A total of 1,014 online questionnaires
were completed among these households. The research,
completed November 2005, has a margin of error
of +/- 2.65 percentage points at a 95 percent
level of confidence. Areas covered in the research
included investment attitudes and behaviors,
asset allocation, issues of retirement, philanthropy,
use of advisors, and attitudes about success.
Read our