Think Like A Billionaire: How The World's Richest Are Investing Today
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Tracking the travels and spending of billionaires like Elon Musk and Mark Cuban can be fun, but examining the investing habits of the wealthy can yield more insights into how we should position our portfolios. Citi recently published its Global Family Office 2024 Survey Insights, which examines how family offices feel about the market and their moves to grow and protect their wealth.
Family offices are private investment firms that invest wealth from the world’s wealthiest families. These sophisticated firms handle billions of dollars in assets. The survey had 338 respondents, two-thirds from outside the U.S., giving a global perspective on wealth management. Half the firms had at least $500 million in assets under management. Around half the family offices were still controlled by the first generation of wealth.
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These wealth managers are optimistic, with 97% expecting positive returns this year. Half those surveyed looked for between 5% and 10%, while another third anticipated 10% to 15%. That may be why many are moving off the sidelines and putting more money to work than ever. The study showed that 43% upped exposure to public and private equity while only 31% raised the amount of cash they held. Half the respondents increased their allocation to fixed income. Hannes Hofmann, head of the family office group at Citi Private Bank, told CNBC, “What we’re clearly seeing is an increase in risk appetite.”
Most family offices invest directly. Sixty percent have an investment team led by a CIO, investment committees, and investment policy statements. They are also actively exploring alternative investments, with three-quarters engaging in direct investing. These offices have two primary concerns: asset preservation and preparing the next generation for their wealth.
Where The Money Is Going Now
Allocation for family offices looks a bit different from it does for retail investors. Only 28% of their money is invested in public equities, 18% in private equity and 12% in direct real estate investing. Investment in private equity was up 42%. Over half family offices have built exposure to generative AI technologies by investing through public equities, private equity funds, and direct private equity. Jeff Bezos’s significant investments in AI companies are an example of this.
Family offices see the massive potential in real estate. The survey showed that 31% of family offices increased their exposure to real estate while only 14% decreased their investment. Looking forward, 36% of family offices cited financing real estate as a primary objective. Both larger and smaller family offices reported real estate as their primary financing focus. While real estate has suffered in recent years, family offices focus on potential opportunities.
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Surprisingly, sustainable investing is not a large investment area for many family offices. 38% of those surveyed had zero exposure, 43% of all respondents reported having zero exposure, and another 43% had less than a tenth of their portfolios sustainably allocated. Those who invest sustainably do so more to align with the family office’s values than to earn returns.
The overall take-away for retail investors is that while public equities are still important, family offices are looking beyond the stock market for income. While many of the opportunities that family offices participate in have significant minimum investment restrictions, there are plenty of ways that individual investors can participate. Fundrise’s flagship fund has invested $1.1 billion in real estate and it has a low minimum entry point. Another option is the Ascent Income Fund from EquityMultiple. It targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets.
Risk is always a factor for any investor, from the biggest family office to the individual just starting out. Combining stock and bond positions with exposure to real estate and other funds is one way investors can take advantage of growing asset classes to help expand diversification and potentially earn stronger returns.
Interest Rates Are Falling, But These Yields Aren’t Going Anywhere
Lower interest rates mean some investments won’t yield what they did in months past, but you don’t have to lose those gains. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
Arrived Homes, the Jeff Bezos-backed investment platform, offers a Private Credit Fund. This fund provides access to a pool of short-term loans backed by residential real estate with a target of 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
This article Think Like A Billionaire: How The World’s Richest Are Investing Today originally appeared on Benzinga.com