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More wealthy Americans turn to alternative investments, says Northern Trust

Friday, March 22, 2013
Opalesque Industry Update - Northern Trust study finds private equity, hedge funds and REITs, among top investment choices for High-Net-Worth

Affluent Americans are more likely to allocate assets to alternative investment strategies in asset classes such as private equity, real estate investment trusts and hedge funds today than they have been for several years. That's especially true for half of high-net-worth investors who say they are better off today than they were five years ago. The findings come from Northern Trust's recent Wealth in America survey, which provides insights into the financial attitudes of 1,700 wealthy Americans.

Thirty percent of high-net-worth investors, defined as those with $5 million or more in investable assets, say they are more inclined to consider alternative investments now than they were five years ago. Among these high-net-worth investors, private equity (35 percent), managed futures (32 percent), REITs (28 percent) are their top investment alternatives choices followed by hedge funds (23 percent) and venture capital (17 percent). More than a quarter (28 percent) say limited partnerships are their preferred legal structure for holding these investments.

"While not suitable for everyone, alternative investments can provide portfolio diversification as well as offer exposure to sources of return not available from traditional stocks and bonds," said Katie Nixon, Northern Trust's Chief Investment Officer for Wealth Management. "Given our Goals Driven Investing approach, we believe every asset class has a unique role in a portfolio, including alternatives. While hedge funds can offer accredited investors diversification and other risk management benefits, private equity can enhance return through manager skill in addition to an illiquidity premium."

This risk premium is of increased importance as the survey found that 63 percent of high-net-worth investors are likely to take calculated risks with their investments to grow their wealth and 52 percent say they will look for new investments to grow their wealth.

The survey also surveyed high-net-worth Americans on other investment topics and found that:

• One in five holds jewelry, art and antiques, and other collectibles as part of their portfolio.
• 56 percent of couples discuss how to manage personal wealth at least once a quarter.
• 59 percent are willing to pay for advice from a financial advisor.
• 81 percent say life goals such as good health and traveling the world are highly important considerations when developing a financial plan. However, they feel less confident today that they will achieve their goals when compared to 2007.

"Whether clients believe they are better off or feel less confident, it is important for them to consider both risk and return when planning for the future," said Nixon. "We work closely with clients to formulate a plan aimed at accomplishing both their financial and life goals."

To learn more about Goals Driven Investing and Northern Trust's survey, visit NorthernTrust.com/wealthinamerica.

Northern Trust's nationwide survey of wealthy individuals seeks to highlight important wealth management issues. The online interviews were conducted by Phoenix Marketing International and NIA Enterprises between November 16 and December 17, 2012. The data contained in this report came from 1,700 online interviews and has a margin of error of +/- 2.4 percentage points at a 95 percent level of confidence.

Northern Trust is a premier wealth management firm that specializes in goals-based financial advice. Northern Trust is ranked among the top 10 U.S. wealth managers with $197.7 billion in assets under management as of December 31, 2012, and more than 70 wealth management offices in the United States and abroad.

Press release


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