A new report from TIGER 21 suggests private equity an real estate are gaining favour among high net worth investors.
The group’s latest asset allocation report for the first quarter of 2012 provides a snapshot of how an important segment of North America’s affluent investors position their portfolios for wealth preservation in an uncertain economic environment. The group’s 200+ members maintain investable assets in excess of $18 billion.
While quarter to quarter asset allocation changes in specific categories have been muted — in no category was there a more than 2 percentage point change from the previous quarter — a look at asset allocation changes over the previous year shows a definite shift in positioning.
Members’ cash allocation was reduced two percentage points to 12% from the fourth quarter of 2011 to the first quarter of 2012, and is now a full five percentage points from a high of 17% in the first quarter of 2011. “This could be portrayed as signaling a cautious optimism in the economy. Yet, it is telling that even at 12%, members’ allocation to cash is still above that of what most financial advisors generally recommend,” says TIGER 21.
Fixed income was down five percentage points to 15% from the first quarter of 2011 when it stood at 20%, and eight percentage points since the fourth quarter of 2009. “The low yields on the bond market and persistent trouble in the sovereign debt market could be contributing factors,” TIGER 21 suggests.
Public equity allocation decreased two percentage points to 22% from first quarter 2011 to first quarter 2012 as TIGER 21 members remain cautious about stocks. Public equity allocation remains way off its over 30% allocation prior to 2009.
Allocation to private equity increased by four percentage points from the first quarter of 2011 to the first quarter 2012 to 14%. TIGER 21 notes that many of the group’s members “have considerable personal experience in the private equity sector and believe that over the long term it represents some of the best opportunities to preserve and build capital.”
Real estate saw the largest increase in allocation over the past year with a five percentage point increase. This increase started in the second quarter of 2011 and reached 24 % by the fourth quarter of 2011.
“There’s a sense from TIGER 21 members that they want to get back into some things that are less volatile and more income- and yield-generating,” says Thane Stenner, managing director and founding member of TIGER 21 Canada.
Stenner also sees interest by some members in private equity, particularly in the technology space and secondary markets that provide liquidity to distressed sellers. There should also be continued interest in hedge funds and real estate in the coming months.