Ultrawealthy Investors Favor Stocks, Focus on Growth in 2013

IPI members reduce cash and fixed income allocations

Ultra-affluent members of the Institute for Private Investors are bullish on equity markets and focused on growth rather than merely preserving capital, according to a survey released Thursday.

IPI said 69 families with assets of at least $30 million participated in its annual Family Performance Tracking survey during the second quarter.

Sixty-three percent of respondents said they planned to increase their allocation to global equities in 2013, and 53% planned to increase positions in domestic equities.    

Growth is the primary objective of 51% of survey respondents in 2013, compared with 47% in last year’s survey, while 36% aim for principal protection, versus 43% in 2012, and 13% look for income, compared with 10% last year.

Wealthy investors enjoyed positive returns in 2012, according to the survey. The average return net of fees was 10.1%, up from 0.6% in 2011. 

Domestic equities accounted for an average 2012 portfolio allocation of 18%, global equities 14%, taxable bonds 10%, municipals 7%, hedge funds and/or funds of funds 18%, private equity 10%, real estate direct investment 6%, commodities 5%, venture capital 2%, direct investments in private companies 2% and other 1%.

The survey showed that investors were more opportunistic. Sixty-nine percent said they had changed their asset allocation based on favorable market conditions in a particular asset class, while 57% had reallocated because of a shift in overall performance expectations and 52% owing to poor performance of a particular asset class.

The end of 2012 was marked by heightened uncertainty about taxes. Respondents most commonly realized capital gains by year-end and either created or altered estate planning vehicles.  

To manage taxes on an ongoing basis, 62% of private investors planned to rely on tax loss harvesting, 47% on asset allocation and 41% on family limited partnerships. 

Thirty-nine percent of respondents sought tax counsel from their accountants, 26% from lawyers and 24% from investment advisors.

Other findings:

  • 42% of respondents planned to decrease cash allocations in 2013, while 44% said they would decrease allocations to taxable bonds in 2013 and 37% would cut back on municipal bonds
  • 40% said they would increase allocations to private equity in 2013, while only 7% would decrease positions
  • 30% of investors planned to increase allocations to direct investments
  • 28% said they would reduce their hedge fund allocation, while 22% planned to increase their allocation.


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