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Five Asset Allocation Moves TIGER 21 Members Made; Still Cautious

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TIGER 21 members raised their allocations to public equity and real estate assets in 2010, according to a new TIGER 21 Asset Allocation Report released March 3. The report, from a peer network of ultra-high-net-worth families and individuals who trade information about investing and wealth issues also said that allocations to private equity, fixed income and cash had decreased.

None of the tweaks to allocations was a big move, and the changes reflect members’ cautious outlook on the economy and recovery: “Public equity at 21% remains low compared with historic standards in the 30-35% range,” the report said.

“While the markets have certainly come a long way from the doldrums of the recession, members remain wary about whether we are in the clear or there will be more bad news,” Michael Sonnenfeldt, chairman and founder of TIGER 21, stated in the release. There are 170 TIGER 21 members who hold a collective $15 billion in investable assets, the release notes.

Looking at allocations for 2008, 2009 and 2010, the biggest shifts were in public equities and hedge funds.

  1. Public equities were 31% in 2008, fell to 19% in 2009 and were at 21% for 2010.
  2. Hedge fund allocations averaged 5% in 2008 and 9% for 2019 and 2010.
  3. Cash and equivalent levels were “historically” high at 14% for 2010. They had been 12% for 2008 and 14% for 2009. “While high net worth investors traditionally had 5-10% in cash to weather a downturn through the period it took to recover, TIGER 21 Members have been registering levels of cash in the low teens for a few years and in the mid-teens for the last two years indicating deep concerns about the recovery and not wanting to get caught with too little cash if there is another downturn,” Sonnenfeldt stated. 
  4. Private equity (PE) allocations are close to where they were three years ago; in 2008 members allocated 10% to PE. That allocation rose to 12% in 2009 and dropped to 9% for 2010. 
  5. Members are holding more liquid assets aside for living expenses. “Our prior surveys indicated that Members were living on approximately 3% of assets when their total sources of income were passive investment returns and a 12% cash allocation was a reserve of four years of expenses. Now with members tightening their belts, and with living expenses suggested at just over 2% of assets, a 14 % cash allocation is really a reserve of more than five years of expenses, which is still at an historic high,” Sonnenfeldt explained.