May 3, 2010

Investors' Portfolios Rebounded in 2009, Report Says

The Institute for Private Investors checks in with its wealthy members.

What a difference a year makes. The Institute for Private Investors (IPI) announced in an April 27 statement that respondents to its 2009 Family Performance Tracking survey reported that their portfolios had bounced back from dismal performance in 2008, with an average return of 17.3%.

In the spring of every year, the institute asks its members how their portfolios performed during the previous year. This year, 27% of IPI's 306 member families participated in the survey.

The statement said that only three respondents reported positive returns for 2008, and their allocation to cash was at an all-time high of 17%. By the end of 2009, however, they had just 8% in cash and were investing the rest: commodities (3%, up from 1% in 2008), global long-only equity (11%, compared with 7% in 2008) and municipals (13% allocation, versus 10% in 2008).

IPI said that its members were holding a higher than usual allocation to fixed income (19%), possibly reflecting liquidity concerns. Liquidity issues may also have informed the increased allocation to long-only equity, all of which was in global long only, and not domestic. Alternatives made up 42% of the average IPI member portfolio at the end of 2009.

This year's survey revealed an interesting shift in sentiment about hedge funds and funds of funds. Since 2000, these have accounted for about one-fifth of IPI investors' portfolios, with allocations peaking at 24% on average in 2006, the statement said. Last year, the allocation dropped to 19%. Six out of 10 members reported problems redeeming assets from a fund; of these, 72% said they would probably not invest with the same manager again. Twenty-eight percent said they would consider or already are reinvesting.

On a brighter note, only 13% of respondents expressed disappointment with their funds' performance, while 85% said they were relatively satisfied with performance and 41% said performance had exceeded their expectations.

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