Wealthy move away from property

THE world’s wealthy have started to show an increasing interest in alternative investments and less confidence in property, the latest Capgemini Merrill Lynch World Wealth Report shows.

The report shows that high net worth individuals (HNWIs) — defined as having financial assets of $1-million or more, excluding their homes — keep their wealth well diversified.

The largest slice of HNWIs’ money is in equities (30%), with 13% in cash, 21% in fixed income and just 16% in property. Some 20% of their money is in alternative investments — hedge funds, foreign currency, commodities and precious metals, private equity and fine art and collectables.

With their access to good financial advice and top-end products, HNWIs are considered to be the “smart” money. There are 8.7million people who qualify as HNWIs, and their total wealth now amounts to a staggering $33.3-trillion.

Rising interest rates around the world appear to be restraining investors’ appetite for real estate.

“We anticipate that HNWIs once again will begin to reduce their real estate allocations: The sharp deceleration of returns in 2005 coupled with the expectation of higher interest rates suggest returns will continue to diminish.”

Private equity is increasingly popular. The report states the US private equity index returned 22.6% in 2005 and that average hedge fund returns fell from 19.7% in 2003 to 7.1% in 2005. — Chris Needham

Article from : www.sundaytimes.co.za