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Where the Ultra-Wealthy Invest Money: Tiger 21

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High-net-worth members of the Tiger 21 peer-to-peer learning network increased their allocation to real estate in the first quarter, again making it their highest allocated asset class.

Tiger 21 reported Monday that real estate investments increased by two percentage points during the first quarter, bringing members’ portfolio allocation to 29%. This represents the highest allocation to the property sector since the organization began tracking member data in 2007.

All other asset classes were flat in Q1.

Tiger 21’s chairman and founder, Michael Sonnenfeldt, noted in a statement that members had held their public equity exposure steady over the last 24 quarters despite the bull market in stocks, and many were prepared for a market correction.

“Members have seen more tangible value in private equity, where they can roll up their shirtsleeves and be directly involved with and in the critical information flow about the challenges and potential of the companies they invest in,” Sonnenfeldt said.

“Real estate has been equally attractive for some of the same reasons. Of course, we do have some members holding cash in order to be positioned to buy inexpensive stock during the next downturn.”

Looking Ahead to Q2

In a separate poll of members, Tiger 21 found that half planned to increase their real estate allocation in the second quarter, 38% planned to maintain their current allocation and only 12% planned to reduce it.

Private equity was the only other asset category to which many members planned to increase their holdings, with 44% planning to do so and 44% planning to maintain their current exposure.

Also notable in the Q1 report was members’ 11% allocation to fixed income, down a percentage point from Q4 and the lowest allocation level to the asset category since Tiger 21 began polling members.

“Generally members are cautious on fixed income because of the low returns and potential for interest rate increases that would dramatically lower bond values,” Sonnenfeldt said.

Bears Outnumber Bulls

The poll found that 59% of members had a bearish outlook over the next 12 months. They expressed concerns about the likelihood of rising interest rates in the second half, the potential for terrorism to disrupt markets, unemployment remaining high, equity markets being overvalued, the Federal Reserve’s large balance sheet and the U.S. dollar’s strength.

In contrast, the bulls who cited interest rates noted that even with an increase they would remain low by most standards.

Bulls also found reason to be upbeat because of low oil prices, expected growth in the economy and in company earnings, and a continued strong run for U.S. equities.

However, even those who described themselves as long-term bulls said they were prepared for a possible market correction of anywhere from 10% to 20%.

The survey found that 52% of members considered the markets fairly valued, while 45% thought they were overvalued.

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