The Strategist

UBS and Campden Wealth reveal the most popular investments of wealthy people


10/01/2018 - 15:57



UBS and Campden Wealth presented a report on activities of family offices for 2018.



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pixnio
A family office is usually a company which task is to centrally manage a wide range of issues for wealthy families. Typically, this is investment management, tax and legal support, planning structure of ownership and inheritance of a family business, maintaining consolidated financial statements.

The study of UBS and Campden Wealth is based on data from a survey conducted among 311 family offices around the world, managing an average of $ 1.1 billion each. About 40% of offices are based in Europe, one third - in North America, and the rest - in Asia Pacific and other parts of the world.

Judging by the results, the wealthiest people in the world like to invest in equities: 28% of their average portfolio falls on this asset class. The asset is followed by 22% of direct investments, real estate (17%) and bonds (16%).

Investments in hedge funds are not popular and continue to decline (to 5.7% at the moment) amid fears about their weak performance and relatively high commissions.

Here are more details about each asset class:

Equities

 On average, family offices allocate 28% of the portfolio for these instruments. Compared with the last year, the figure increased by 4.3 percentage points. 22% of investments were located in developed markets and 6% - in developing ones. Investing in the stock market occupies most of the portfolio, and it is not surprising as such investments are very profitable. For example, last year, the return on investment in developed and emerging markets was 23% and 38%, respectively.

Bonds

On average, these debt instruments account for 16% of portfolios. This year, family funds invested 24% of their bond portfolio in the emerging markets of South America, Africa and the Middle East.

Direct investments

Private equity holds a significant share - 22% of the average portfolio, which is 3.8 percentage points higher than in 2017. Profitability of family offices in the field of direct investments increased and averaged 18% compared with 13% a year ago.

Real estate accounts for 17% of the average portfolio and is the third largest asset. Family offices in Europe invest most in real estate, followed by Asia Pacific (18%) and North America (13%).

Hedge funds

Popularity of investments in hedge funds has been falling for the third year in a row. Investing in hedge funds now amounts to only 5.7% of the average portfolio, which is 3.2 percentage points less than a year ago.

The report also notes how geographical location of the family office affects choice of asset class for investment.

North America invested more in bonds of developed countries (27%) and private equity funds (9.9%);

Europe preferred alternative assets (50%) and real estate (23%);

The Asia-Pacific region invested the most in equities (28%), real estate (18%) and private investment (15%).

Emerging markets preferred alternative assets (37%), stocks (25%) and bonds (24%).

source: businessinsider.com




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