BT : Rich will invest more in equities this year: survey

Business Times - 21 Jan 2010
Rich will invest more in equities this year: survey

(ZURICH) The wealthy people increased their equities investments to US$7.11 trillion at the end of last year, a global survey showed. It said they will continue to bet on stocks this year in a quest for higher returns after two years of crisis.

An asset allocation survey by consultancy Scorpio Partnership said stocks are currently the most favoured asset class among private bank clients, representing nearly a half of a balanced portfolio, and will remain a favourite.

'Clients who have been in the doldrums during the crisis are now keen to get in money-making mode. They want to re-engage in money-making through the equities markets,' said Stephen Wall, director at the Scorpio Partnership.

The wealth management industry was hit by the credit crisis along with the entire financial sector but also faced its own challenges like the scandal of Bernard Madoff's US$65 billion Ponzi scheme, a crisis at global giant UBS and a crackdown on offshore financial centres.

The survey assessed responses from 33 wealth managers that together hold nearly half of the segment's US$14.5 trillion assets of clients with typically US$1 million or above.

About one half of equities investment was managed on an external basis and this should increase, the survey showed.

Despite the increased appetite for equities, rich clients have not given up on cash and fixed-income, which together represent 44 per cent of a balanced portfolio.

The big losers were alternative investments, with the exception of real estate, a traditional hedge against inflation.

Investments into alternatives such as hedge funds or structured products shrank by more than two-thirds to 7 per cent of a balanced portfolio and is not seen increasing in the short term.

'Wealth managers are looking at opportunities to benefit from the ongoing volatility while still maintaining defensive positions,' said Mr Wall.

To this end, managers are starting to diversify investments into their clients' traditional home markets, with a focus on emerging markets and in particular the Asia-Pacific region, Mr Wall said.

The survey also showed that wealth managers have responded to diminishing margins by boosting the sale of in-house products to 40 per cent from 22 per cent at the end of March\. \-- Reuters