Wealthy Investors Fear Fortunes Will Fade While They’re Playing Golf

We’re all looking for a safe but adequate income stream, and that includes the very wealthy. Like most investors, they’re having a hard time finding it.

That’s clear in the latest portfolio update on the asset allocation of the “ultra-high-net-worth investors” that make up Tiger 21, a peer-to-peer learning network. They just can’t find passive assets that produce enough income to let them put their portfolios on autopilot, said the group’s founder and chairman, Michael Sonnenfeldt.

This is hardly a tragedy; there is that big pile of principal they can dip into. The group’s 440 members, whose average age is 54, are managing more than $40 billion worth of personal investable assets. Still, many are lowering their annual portfolio withdrawal rates and trying to work their assets harder.

“Our members find they can’t contemplate a life of golf, where they are just investing in passive assets, unless they are willing to be incredibly disciplined on their expenses,” Sonnenfeldt said. “Many say ‘I’d rather sleep well than eat well, so I’ll cut back from living on 3 or 4% of net worth to 2%.”” Not that 2% of a multimillion-dollar portfolio is a bad number, he added.

That means holding fewer passive assets, such as bonds, and having the biggest chunk of their money in private equity since 2007.

“In a sustained low- or negative-interest-rate environment, if you’re standing still, you’re going backwards,” Sonnenfeldt said. “You need to reach for risk and manage it to generate any kind of performance in a portfolio.” The Tiger 21 graphic below shows the current asset allocation.