A study of the High Net Worth holdings show optimism in real estate and business.
The anti-wealth fever is creating significant conversation as we head into the 2020 elections. With as much of the rhetoric politicians dish out about wealth, they seem ignorant of how it is created and used. Most wealth, especially in North America, is held in the form of business assets, not personal assets. Opportunistic politicians often claim or imply that wealth at the top comes at the expense of the whole. The reality is the opposite. Wealth and those who hold it supports jobs, opportunities, and incomes for millions of others.
Let’s look at some key insights about where the wealthy are putting their money. 2019 stats for High Net Worth holdings in North America have a few key takeaways.
High Net Worth Holdings in Real Estate
During 2019, real estate holdings accounted for the largest allocation. Hovering between 28 to 30 per cent. The wealthy, both HNWI and UHNWI’s remain optimistic about strategic opportunities across residential, commercial as well as industrial real estate. The 2020 forecast is calling for less inventory, low interest rates and slower appreciation.
Millennials are starting to hit their stride and are estimated to take more mortgages than Gen X and the Baby Boomers in the next year. This offers opportunities over the next decade in second tier metros and suburbs with good school districts. There are also a few companies taking a stab at tokenizing real estate. These companies are creating a new asset class of more liquid housing backed securities.
High Net Worth Holdings in Private Equity
Private equity is also above historic levels at 23 percent both in investing directly in companies or indirectly through dedicated funds. Today’s wealthy continue to look for opportunities to invest directly in situations where they can roll up their sleeves and add value from a strategic or operational perspective. They are leveraging their money and relationships to accelerate emerging companies and technologies in the marketplace.
We see this reflected in the stock markets continuing to strengthen and closing at highs despite impeachment in the White House.
High Net Worth Holdings in Cash
Cash holdings remained steady with an allocation of 12 per cent, a relatively high level based on trends over the last decade. The last time we saw cash holdings that high was the first quarter of 2013. In election years, this is not uncommon. The wealthy pull other assets and hold cash as they wait to see whether blue or red will occupy the highest office in the United States in 2021.
Currencies, commodities, fixed income, hedge funds, and public equities remained consistent parts of balancing their portfolios.
Concerns about the deficit, trade issues, government instability and international threats are not affecting the well performing economy.
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