High-Net-Worth Asset Allocation Report
Long Angle's annual high-net-worth asset allocation report presents the latest investment trends and strategies for portfolios ranging from high-net-worth to ultra-high-net-worth investors.
Introduction
The 2023 High-Net-Worth Asset Allocation Report conducted by Long Angle offers a snapshot into the evolving strategies of high-net-worth investors, highlighting a clear shift towards tangible assets like real estate and refined approaches to equities and alternatives. This year's findings reveal how high-net-worth individuals are adapting their portfolios in response to market volatility and economic shifts, emphasizing growth opportunities and strategic diversification.
2022 vs. 2023 High-Net-Worth Asset Allocation
The 2023 High-Net-Worth Asset Allocation Report presents a comparative analysis of high-net-worth asset allocations between 2022 and 2023, highlighting strategic shifts in investment priorities and portfolio composition among affluent investors.
Key Changes and Insights:
Shift Toward Real Estate: An increased allocation towards both personal and investment real estate likely reflected recent strong returns in this asset class.
Decreased Cash and Bond Holdings: There was a noticeable decrease in allocations to cash and bonds, suggesting a move away from traditionally conservative investments towards more growth-oriented assets.
Alternative Assets: While there was a slight decrease in allocations to alternative assets outside of Private Equity, alternative investments maintained their appeal. This category includes cryptocurrencies, hedge funds, and private credit, indicating a continued interest in diversifying income sources and potential for high returns.
Equity Investments: The allocation to public equities remained substantial, although there was a nuanced shift within this category. High-net-worth individuals showed a keen interest in balancing between public and private equities, adjusting their equity portfolios to navigate market uncertainties and capitalize on private market growth opportunities.
Source: 2023 High-Net-Worth Asset Allocation Study by Long Angle
What is the current asset allocation for high-net-worth individuals?
In 2023, the average asset allocation includes: 37% in public equities, 17% in private equities, 16% in personal real estate, 11% in investment real estate, 14% in cash and bonds, and 5% in alternatives.
Source: 2023 High-Net-Worth Asset Allocation Study by Long Angle
Types of Asset Allocations For High-Net-Worth Investors
High-net-worth individuals diversify across several asset classes:
Equities: Both public and private equities form a significant part of the portfolio, with a strategic mix to leverage growth opportunities.
Fixed Income: Bonds and other fixed-income securities offer stability and income, with allocations adjusted based on interest rate expectations and economic outlook.
Real Estate: Investment in real estate is on the rise, viewed as a hedge against inflation and a source of passive income.
Alternative Investments: This includes commodities, hedge funds, and digital assets, providing unique benefits and diversification effects.
Diversification Strategies for High-Net-Worth Portfolios
The 2023 High-Net-Worth Asset Allocation Report report underscores diversification as essential for high-net-worth portfolios, aiming to balance risk and enhance returns through a strategic mix of assets, geographic spread, and sector allocations.
Key Strategies
Asset Class Mix: Portfolios blend traditional equities and fixed income with increasing allocations to real estate and alternative investments, seeking higher returns and diversification benefits.
Geographic and Sectoral Diversification: Investments are diversified across various regions and sectors, including technology, healthcare, and renewable energy, to mitigate region-specific and industry-specific risks.
Alternative Investments: There's a growing interest in alternatives like hedge funds, private equity, and digital assets, attracted by their potential for high returns and low market correlation.
Real Estate Investments: Highlighted for their income generation and inflation hedging capabilities, real estate investments are on the rise among high-net-worth individuals.
Tactical asset allocation is employed to adapt to market changes and economic signals, allowing dynamic portfolio adjustments. Equities dominate, but there's a noticeable trend towards alternatives and real estate for their unique advantages. Investment preferences vary with age and net worth, with riskier assets favored by younger and wealthier individuals.
Asset Allocation by Age and Net Worth
The 2023 High-Net-Worth Asset Allocation Report report reveals distinct asset allocation trends among high-net-worth individuals based on age and net worth, reflecting their varied risk tolerances and investment goals.
Source: 2023 High-Net-Worth Asset Allocation Study by Long Angle
Asset Allocation By Age:
Younger Investors (30-39 years) favor private equities and real estate, seeking higher returns through riskier assets.
Middle-Aged Investors (40-59 years) shift towards public equities and fixed income, balancing growth with capital preservation.
Older Investors (60+ years) prioritize fixed income and cash equivalents, focusing on capital preservation and income generation.
Source: 2023 High-Net-Worth Asset Allocation Study by Long Angle
Asset Allocation By Net Worth:
Under $5 Million: Portfolios are diversified across public equities, fixed income, and real estate, with a cautious approach to alternatives.
$5 Million to $25 Million: There's an increased allocation towards private equities, with a slight decrease in real estate investment.
Above $25 Million: Ultra-high-net-worth individuals significantly favor private equities, reflecting their advanced wealth accumulation and strategic focus on asset consolidation and legacy building.
The report highlights a progression from growth-oriented strategies among younger investors to a focus on wealth preservation in older age and higher net worth brackets. This nuanced approach underscores the importance of aligning asset allocation with one's investment horizon, risk tolerance, and financial objectives, serving as a guide for both investors and advisors in optimizing portfolio strategies.
About Long Angle
Long Angle is a private community of 3,000+ high-net-worth investors who leverage their collective expertise and scale to access and underwrite some of the world's best alternative asset investments. Asset classes range from private equity, search funds, and private credit to secondaries, real estate, and venture capital.
Long Angle is a high-net-worth peer network, not a wealth manager. Members independently make their investment decisions on a deal-by-deal basis. They are treated as partners in every investment, with full transparency regarding the investment team's diligence and underwriting processes. All members receive equal access to negotiated fee discounts, powered by the community's $30 billion in collective assets.
Membership is free but requires an interview with a current community member, as well as validation of investable assets.
FAQ
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High-net-worth individuals' asset allocation decisions are influenced by a combination of factors including their risk tolerance, investment goals, time horizon, and the current economic environment. They also consider tax implications, estate planning needs, and liquidity requirements. Strategic asset allocation is tailored to each individual's financial situation and life goals, with adjustments made in response to changes in market conditions, financial objectives, or personal circumstances.
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High-net-worth individuals should review their asset allocation at least annually or as major life events occur (such as marriage, the birth of a child, or retirement) that could affect their financial goals or risk tolerance. Additionally, significant market fluctuations or economic changes might necessitate more frequent reviews to ensure that the portfolio remains aligned with the individual's investment objectives and risk profile.
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Alternative investments, such as private equity, hedge funds, real estate, and commodities, play a crucial role in high-net-worth portfolios by providing diversification benefits, potential for higher returns, and reduced overall volatility. These investments can offer unique opportunities not correlated with traditional stock and bond markets, helping to spread risk and enhance returns over the long term. High-net-worth individuals leverage alternative investments also for their potential tax advantages and to gain access to investments that can hedge against inflation or economic downturns.
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Strategic Diversification: Expanding into alternative investments and real estate, high-net-worth individuals diversify their portfolios to mitigate risk and seek higher returns.
Tactical Adjustments: They adjust allocations based on market conditions and economic forecasts to exploit short-term opportunities without derailing long-term strategies.
Risk Management: Balancing growth and risk through careful investment selection within each asset class is crucial for protecting capital.
Active Review and Rebalancing: Regular portfolio evaluations and adjustments ensure alignment with changing goals and market dynamics.
Professional Advice: High-net-worth individuals rely on financial advisors for complex decision-making, estate planning, and tax strategies, valuing their expertise even as they take a more direct role in managing their investments.
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The growth of digital assets, including cryptocurrencies and blockchain technologies, has introduced new opportunities for diversification and return on investment for high-net-worth individuals. Despite their volatility, these assets are increasingly included in portfolios for their potential for high returns and as a hedge against inflation and currency devaluation.
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Disclaimer
This website is operated by Long Angle, Inc. ("Long Angle"). The information provided here is not investment advice or an endorsement of any securities. Alternative investments like private equity, venture capital, and real estate are inherently risky and illiquid, suitable for sophisticated investors who can bear significant losses. Past performance doesn't guarantee future results. Before investing, conduct thorough due diligence, consider risk factors, objectives, fees, and consult with your advisors. Alternative funds aren't FDIC insured and may involve illiquid securities with long holding periods. Information here is based on reliable data but not guaranteed for completeness. No content constitutes an offer to sell or solicit to buy any investment. Such offers are in fund disclosure documents, which you should review for full understanding. This site's information isn't legal, tax, or investment advice. Diversify your portfolio, with alternatives as a portion. Specific funds mentioned are for illustration, not indicative of future profitability.