High Net Worth Investors Trimming Stock Positions While Increasing Real Estate Investment
High-net-worth individuals (HNWI) are pulling back on their stock investments while diversifying portfolios further into real estate.
Many HNWI investors are wary of the current geopolitical climate, including the ongoing trade war with China and visible instability in Washington, specifically around the federal reserve. Members of TIGER 21, an investment club for high net worth individuals reduced their stock allocation from 22% to 21% during the second quarter according to their quarterly report.
TIGER 21 is a group of approximately 700 individuals with at least $10M to invest and offers a good insight into where the wealthy are investing.
Fears and uncertainty on the world stage is making investors nervous, but the federal reserve lowering rates is also cause for concern. Members see rate drops as an immediate red flag and are worried about how the fed is becoming increasingly politicized.
These investors continue to maintain a 12% allocation in cash and cash equivalents, both as a defensive move and to scoop up new opportunities in the event of a downturn.
At the same time, wealthy investors continue to feel optimistic about real estate. TIGER 21 members have increased their investments in real estate for the first time in three quarters making their asset class account for 28% of their holdings, up from 26% in the first quarter.
Stocks aren’t the only area where wealthy investors are pulling back their exposure.
Members of TIGER 21 cut their allocation to hedge funds, and that asset class accounts for 4% of their holdings, down from 5% in the first quarter.
They’ve also dialed down their holdings in private equity. They now hold 24% of their investable assets in that space, down a percentage point from the prior quarter.
During times of uncertainty or political conflicts around the globe, HNWI turn more of their investment portfolio into real estate for many reasons:
Real estate is a great protection against inflation
Real estate offers much lower risk in comparison to volatile stocks
Real estate offers many tax benefits including capital gains benefits from opportunity zones
Real estate also offers the potential for cash flow and further diversification within the asset class.
If you would like to learn more about how Ettro Capital makes real estate investment simple, please don’t hesitate to contact us, or read more on why you should invest in real estate in 2019.