KKR, an investment firm, released a report on Wednesday that outlines trends in the ultra-high-net-worth market, which it considers a unique subset of individual investor clients it serves globally.
Henry McVey, KKR’s head of global macro and asset allocation, in collaboration with Jim Burns, head of the firm’s individual investor business, surveyed some 50 of their ultra-high-net-worth clients, including several family offices.
For purposes of the report, ultra-high-net-worth investors had $30 million or more in investable assets, compared with $10 million to $30 million for the typical high-net-worth investor.
McVey and Burns found that the average KKR ultra-high-net-worth investor surveyed has a much different profile than the average high-net-worth individual or institutional investor. Most operated in a formalized family office format, with an average net worth well upward of $1 billion.
Many were running large businesses, viewed investing more on an absolute return basis and valued deal sourcing.
They found that these investors’ accounts maintained a sophisticated approach to global asset allocation that tended to include a diversified, multi-asset class portfolio with a heavy weighting in alternatives.
Following is a comparison of surveyed investors’ allocations with those of pensions and high-net-worth individuals:
Domestic equities: UHNW, 20%; pensions, 20%; HNW, 28%
International equities: UHNW, 9%; pensions, 26%; HNW, 15%
Fixed income: UHNW, 15%; pensions, 28%; HNW, 33%
Alternatives: UHNW, 46%; pensions, 24%; HNW, 22%
Cash: UHNW, 10%; pensions, 3%; HNW, 2%
The research showed that ultra-high-net-worth accounts have been earning strong returns in recent years, harnessing structural themes to their benefit.
Ultra-wealthy investors have embraced capital markets dislocation, such as the threat of a Greek default, and have taken early advantage of shifts in the banking system, deploying billions of dollars into areas such as private credit and asset-based lending when traditional financial intermediaries pulled back.
They have also taken advantage of the illiquidity premium in private credit and private equity to earn strong absolute returns.