Wealthy investors are using alternative assets such as hedge funds, private equity and real estate to diversify portfolios and generate higher returns, according to a survey released on February 27. The study done for Northern Trust Corp showed that 70 percent of the respondents had some exposure to alternative assets.
The survey was the first that Northern Trust has done that was not confined to the company's own clientele.
The survey of 1,014 high net worth households with $1 million or more of non-real estate liquid or investable assets found that 18 percent of portfolios were in alternative assets.
In the survey, which was completed in November, those who were younger and those who were wealthier tended to have a higher percentage of assets in alternative investments compared to the group as a whole.
Among those with $5 million or more of investable assets, the percentage in alternative assets was 26 percent. Millionaires age 35 and under had 27 percent of portfolios in alternative assets.
The wealthier households and the younger millionaires also had a higher percentage of their portfolios in cash.
John Skjervem, Northern Trust Chief Investor Officer for Personal Financial Services, said the interest in alternative assets was a "logical response" to low yields that have been persistent in traditional asset classes.
"There was a fairly material discrepancy between this universe of investors versus what we are recommending to our clients," he said. The respondents' cash balances were higher than Northern Trust is recommending. Skjervem said the fact that the study was taken near the end of the year could have played a role as wealthy investors prepared to pay taxes on their incomes and property.
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