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

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

Featured video

INTV

Financial health of advisory firms is excellent. Or is it?

Deputy editor Bob Hordt and senior columnist Jeff Benjamin discuss the fact that double-digit growth in revenue and assets doesn't necessarily spell a rosy future.

Latest news & opinion

Don't be fooled by the numbers — the industry is in a dangerously vulnerable state

Last year's stock market gains helped advisers turn in solid growth in assets and revenue, but that growth could disappear in the next market downturn.

Divided we stand: How financial advisers view President Trump

InvestmentNews poll finds 49.2% approve of his performance, while 46.7% disapprove. How has that changed over the course of his presidency?

10 states with the most college student debt

Residents of these states have the most student debt when you consider their job opportunities.

Ex-Wells Fargo brokers sue for damages, claiming they lost business in wake of scandals

In a Finra arbitration complaint, two brokers allege that Wells Fargo's problems damaged their business.

Invesco to buy OppenheimerFunds

Deal brings Invesco another $246 billion in assets, as well as high-fee actively managed funds.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print