Investors with $25 Million or More Are Moving More Heavily Into Alternative Investments
Chicago, IL (MMD Newswire) September 6, 2012 -- Faced with the possible expiration of the Bush tax cuts on income and capital gains, the so-called fiscal cliff, at the end of 2012, and dissatisfied with lackluster investment performance, investors with at least $25 million in net worth are taking aggressive steps to protect their assets while simultaneously seeking much higher returns through alternative investments, according to new research from the Spectrem Group.
At 25 percent of total investable assets, alternative investments make up a growing portion of the investment portfolios of these wealthy investors, compared to 20 percent in 2010 and 16 percent in 2007, says Spectrem Group. Hedge funds, for example, are owned by 47 percent of $25 million-plus households. Stocks and bonds, including restricted stock and options, account for 18 percent of their total investments, down from 20 percent in 2010 and 21 percent in 2007.
Just 107,000 U.S. households had at least $25 million in net worth at the end of 2011. Fewer than one-third inherited their wealth, Spectrem Group found, while the largest group, at 27 percent, are business owners. More than half are still working and another 21 percent are semi-retired. With a mean age of 60 and 38 percent younger than 55, these wealthiest investors are also younger on average than ultra high net worth investors, with net worth between $5 million and $25 million and who have a mean age of 67 and millionaire investors, with net worth of $1 million to $5 million and have a mean age of 63.
"After the slow growth of the past few years, coupled with the potential of a sizable tax hit, the vast majority of these wealthy investors are seeking outsized investment returns. At a minimum, they expect their investment returns to exceed the overall market return," says George H. Walper Jr., president of Spectrem Group. "But many are considerably more aggressive, with more than one-quarter saying they expect to make an annual rate of return of at least 16 percent. In particular, 11 percent expect returns greater than 25 percent."
At the same time, these investors are taking an offensive strategy toward taxes. Six out of 10 are investing in tax-free bonds, 59 percent are revising their estate plans and 55 percent are meeting with tax planners. Nearly one-quarter, or 24 percent, say they considering a change of legal residence to a state that doesn't have state income tax. Other efforts: 47 percent are increasing their charitable contributions and 28 percent are buying tax-advantaged life insurance.
More insights from Spectrem Group's $25MM+ Investor 2012 report are available on Spectrem's MillionaireCorner.com, including:
- Charitable Giving of Time and Money Down in Ultra Wealthy Households
- Alternatives Provide Returns Required by Ultra Wealthy
Research methodology
Spectrem's $25MM+ Investor 2012 was fielded in June and July 2012. A total of 201 individuals qualified based on the aggregate total of the household's indicated assets and liabilities. The online and mail surveys were completed by the person primarily responsible for making the day-to-day financial decisions within the household.
About Spectrem Group
Spectrem Group is a strategic consulting firm specializing in the affluent and retirement markets, integrating proprietary research with expertise in building business, marketing and M&A strategies. Its professionals have held senior management positions at leading global companies.
About Spectrem's MillionaireCorner.com
MillionaireCorner.com is a powerful source for up-to-the-minute news and information for investors, about investors designed to fuel financial growth. It incorporates Spectrem Group research as well as outside information. In the future, the site will offer financial adviser referrals.
Contact: Lois Padovani Padovani Communications Inc. 630-241-1430 l.padovani@comcast.net Gardi Wilks Wilks Communications 708-434-5006 gardi@wilkspr.com ###