Where Ultra-Wealthy Put Their Money in Q1: Tiger 21
A prime example of wealthy families banding together to bring clout and bargaining power in support of their institutional investment strategies. **JB**
Wealthy investors’ allocation to hedge funds hits historic low
Wealthy members of the Tiger 21 peer-to-peer learning network increased their allocations to real estate and commodities in the first quarter, according to a new report from the organization.
During the same period, they reduced allocations to fixed income, hedge funds and private equity.
Tiger 21 said the report measures members’ aggregate asset allocation exposures based on presentations to fellow members. Data are collected over the course of a year, with reports issued quarterly. Collective data are presented in a year-over-year format to ensure a more meaningful asset allocation representation.
Real estate allocations hit a new high of 32% in the first quarter, two percentage points above the previous high in the fourth quarter.
Tiger 21 noted that a relatively large percentage of members had created their wealth in real estate and continue to own significant real estate portfolios.
Members also allocated 1% to commodities in the first quarter, their first commodity exposure since the third quarter of 2014.
Allocations to private equity, fixed income and hedge funds each fell by one percentage point from the fourth quarter to 20%, 9% and 5%, respectively. Private equity and hedge funds were the only asset classes to experience declines in the fourth quarter as well, each down by one point.
The report noted that at 5%, hedge funds are tying their historic low for members’ allocations, breaking below a trend of 6% to 8% going back to the third quarter of 2013.
In contrast, private equity allocations have steadily increased from an average 9% in 2010 to twice that today.
Recent research shows that private equity makes up an average 21% of a family office portfolio, a higher proportion than any other asset class. And institutional investors in private equity have been increasingly satisfied with the asset class over recent years.
Allocations to public equities (21%), cash (11%) and currencies (0%) did not change from the previous quarter.
“Our members prefer to play an active role in management of their portfolios while embracing a strategic, long-term approach to investing,” Tiger 21’s chairman and founder, Michael Sonnenfeldt, said in an email message.
“These might seem contradictory, but in a low-interest environment, our members are increasingly allocating to passive equity indexes for public equity exposure, while rolling up their shirtsleeves in both private equity and real estate with direct investments — where they think they have an edge.”
As they have done so, he said, they shifted away from hedge fund and fixed income investments in recent years.