Pssst. Want to know a secret? Want to know how the ultra-affluent ($30+ million) are managing their money in unstable times like these? You may be surprised to learn that they invest a whole lot differently than you or your adviser.
According to the IPI (Institute for Private Investors), there are three distinct investment trends that the ultra-wealthy are taking advantage of:
Going global. Because of unnerving risk multiples in the European Union, many high-net worth investors are looking outside the EU and the U.S. and setting their sights on the emerging and frontier markets. Some hot spots are Indonesia, Chile, and Singapore.
Hard assets. The IPI also found that the ultra-affluent have allocated capital to commercial real estate, land, gold, and even artwork. Many smaller investors can’t grasp these asset classes because of their lack of liquidity. Believe it or not, it’s beneficial to have some assets illiquid and uncorrelated to the markets. This secret sauce of illiquidity and market de-coupling is what has made Yale’s endowment so successful. It has returned an average of 10.1 percent per year over the last decade.
Keeping it private. Ask Mitt Romney how his IRA became worth an estimated $100 million and he’ll tell you to invest privately. Real wealth is usually not made in the public (common) stock markets. It’s made in private business, be it direct ownership or private equity. The ultra-wealthy and the most successful endowments (Yale, Stanford, etc.) use private equity investments to generate large returns and further diversification.
BONUS secret. Working with high-net worth clients for years has given us unique insight into how they think and prepare for retirement. Many, if not most, of our clients have expressed concern about high future inflation. That being said, their solutions are more sophisticated than just buying gold. Real inflation protection can be obtained by having a basket of precious metals, opportunistic real estate, soft commodities, secured floating income investments, and energy/material commodity exposure.
Robert Russell is CEO & CIO of the Ohio-based Russell & Company, a private wealth management firm specializing in helping affluent individuals ages 45 and up create and preserve their wealth. He co-hosts a radio show, authors The Rob Report blog, and is a frequent contributor to FOX Business and CNBC.
Securities offered through Kalos Capital, Inc., Member FINRA, SIPC. Investment Advisory Services offered through Kalos Management, Inc., 3780 Mansell Rd. Suite 150, Alpharetta, GA 30022, (678) 356-1100. Russell & Company is not an affiliate or subsidiary of Kalos Capital, Inc. or Kalos Management, Inc.