Fleeing hedge funds, wealthy investors take shelter in real estate

Concern over high valuations and geopolitical risk pushes them back to basics

Jul 19, 2017 @ 10:40 am

By Bloomberg

+ Zoom
(Bloomberg)

Wealthy investors boosted bets on real estate and left hedge funds and equities as concern over high valuations and geopolitical risk push them back to basics.

They had 33 percent of their portfolios on average in real estate at the end of the second quarter, according to a survey by Tiger 21 released Tuesday. That's a record since the group of high net-worth investors started measuring aggregate allocations in 2007.

The average allocation of members in hedge funds fell to an all-time low of 4 percent. That compares with about 5 percent in the fourth quarter of 2008 in the midst of the financial crisis. Hedge funds have been under pressure from investors troubled by their high fees and poor performance.

Michael Sonnenfeldt, founder of Tiger 21, said in an interview that the increase in real estate exposure is an "extraordinary move" that's taken place as investors have shifted out of hedge funds and stocks. Poor returns from fixed income and concern about geopolitical risk also contributed to the move, he said.

"Our members are most comfortable with assets they can have direct ownership of. They can own a building or a part of a small company," Sonnenfeldt said, adding that many Tiger 21 members made their money in real estate and private equity. "When you have such a low ability to produce returns you go to income-producing assets."

The Tiger 21 survey differs from a more optimistic report on hedge funds last week from Credit Suisse Group AG that showed allocators intended to increase investments in hedge funds over the next six months.

Tiger 21's network includes members with assets of about $10 million to $1 billion, and represents a combined $51 billion. The survey represents responses from about a quarter of the group's 520 members, Sonnenfeldt said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Vanguard's Joe Davis: Prepare for lower expected returns

The next five years will be more challenging for the markets than the past five, according to Joe Davis, global chief economist at Vanguard. Here's why it's more important than ever to stay reasonable with return expectations and stick to the plan.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print