Every year, Tiger 21, the peer-to-peer network of ultra-wealthy investors, asks its members to name their favorite investments and managers.
This year, though still far in the lead, public equities gave ground to private equity and real estate as members’ favorite investment. Thirty-five percent of respondents chose public equities, down from 41% a year ago.
The most common investment for 43% was individual stock purchases, a seven percentage point drop from 2013, and 14 points below 2012. Exchange-traded funds at 25% were the next most common investment, followed by mutual funds/long-only funds at 17% and hedge funds at 14%.
As for sector investing, 27% of respondents favored financials, 16% consumer discretionary and energy, 13% technology and 11% healthcare.
The survey found that Apple (AAPL) and Berkshire Hathaway (BRK.A) had again traded spots for favorite single stock pick, with Apple on top this year. Rounding out the top five equity picks were SPDR S&P 500 ETF (SPY), Health Care SPDR ETF (XLV) and iShares MSCI Emerging Markets ETF (EEM).
“Our members are long-term investors,” Tiger 21’s founder and chairman Michael Sonnenfeldt said in a statement.
“In the case of Apple and Berkshire Hathaway, regardless of which stock comes in on top, their consistent presence on our list shows that our members have a fundamental belief in those companies for the long-term.”
For this year’s member-favorites survey, Tiger 21 polled its more than 290 members, who collectively manage approximately $30 billion in investable assets.
Private Equity Gains, Hedge Funds Decline
Nineteen percent of wealthy members chose private equity as a favorite investment strategy this year, continuing the multi-year increase seen for this asset class.
For the first time, Tiger 21 asked members how their private equity allocation broke down:
- 63% was allocated to direct investments in members’ own companies
- 17% went to private companies that were not their own
- 20% was targeted to funds
“The breakdown of private equity investments across private equity funds, direct investments and owned businesses is evidence that members are investing in what they know, and using private equity to drive long-term growth in their portfolios,” Sonnenfeldt said.
He noted that many members had made their wealth in private companies. Private equity, he said, gave them superior access to information in private companies, enabling them to help solve problems when they arose, in contrast to public investments where the stakeholder is often the last to find out about a problem.
Real estate moved from the fourth favorite investment strategy to number three in this year’s survey, favored by 16% of members. Respondents named residential real estate investments most often, followed by commercial investments.
Hedge fund investments found favor with 15% of members, down two percentage points from a year ago.
Broken down by investment strategy, 39% of members chose equity long/short, a decline of five percentage points from last year, followed by relative value chosen by 24%; multi-strategy, 12%; event-driven, 9%; funds of funds, 9%; and macro, 6%.
“Members’ allocation to hedge funds is at an all-time low,” Sonnenfeldt said. “With 40% growth in our membership this year (the strongest year in our 15-year history), it is unclear to what extent the low hedge fund allocations reflect different priorities in new members’ portfolios or whether it is a further erosion in members’ attraction to hedge funds.”
Sonnenfeldt said hedge funds used to be a main substitute for public equities, but members may now feel they are getting more efficient equity exposure through ETFs and Indexes.
Fixed Income was the fifth most popular investment category, selected by 9% of members. Municipal bonds were member’s largest fixed income category for the third consecutive year, with exposure through mutual funds, individual names and managed portfolios from advisors.
Commodities gained three percentage points to move to 4% this year. Energy commodities were the predominate investment listed by Tiger 21 members.
Cash and cash equivalents were named by 2% of members, the same as in 2013.