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Where the Ultra-Wealthy Invested in Q3: Tiger 21

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Wealthy members of Tiger 21’s peer-to-peer learning network bumped up their allocation to hedge funds in the third quarter and cut back their real estate exposure, the organization reported this week.

Investors raised their allocation to hedge funds by one percentage point from 4% in the second quarter, which was Tiger 21 members’ lowest allocation level since the organization began collecting data in 2007.

Hedge Fund Research reported last week that hedge funds posted strong gains in October — the HFRI Fund Weighted Composite Index was up 1.3% — for their 12th consecutive positive month and their strongest return since July 2016.

“Tiger 21 members, by their very nature as successful investors and entrepreneurs, have their finger on the pulse of the markets,” the organization’s founder and chairman, Michael Sonnenfeldt, said in a statement.

Sonnenfeldt acknowledged that some hedge funds had experienced an uptick in returns of late — “a trend that has not gone unnoticed by our members. Nonetheless, as discussed during Tiger 21 group meetings, generally, hedge funds tend to do better in environments where interest rates are higher, and in a low interest rate environment, the high fees and lock-up periods continue to concern our members.  

“Moreover, to the extent hedge funds are seen as a substitute for public equity exposure, our members increasingly find index funds and ETFs a superior alternative.”

Sonnenfeldt noted that members continued to have historically high allocations to risk assets, including public and private equities and real estate, with more than 70% of their portfolios allocated to these three classes alone.

In a reversal, Tiger 21 investors reined in their allocation to real estate during the third quarter to 31%, down two points from the previous quarter.

The report noted that this bucked a trend of steadily increasing allocations to the real estate space since the 2016 second quarter. Still, the report said, real estate remained Tiger 21 members’ largest asset allocation.

Third quarter allocations to public equities and fixed income both increased by one percentage point, to 21% and 10%, while commodity holdings fell one point to 0%.

Members’ allocations to other asset classes remained unchanged from the second quarter:

  • Private equity, 21%
  • Cash, 11%
  • Currencies, 0%