Over the last three years, wealthy families have increased exposure to private equity investments, while reducing exposure to hedge funds, commodities and fixed income, says a new report from Tiger 21.

Tiger 21

Tiger 21 members: Wealthy families representing nearly $26 billion in AUM

In the third quarter of 2011, Tiger 21 members, wealthy families representing nearly $26 billion in assets under management, had only 12 percent of their portfolio devoted to private equity. After the second quarter of 2014, that number had climbed to 22 percent, up two percent from the previous quarter.  This is not only the biggest rise in allocation since 2011, but also the biggest current shift noted in the Tiger 21 report.

Cash or cash equivalents rose slightly on the quarter, from 10 percent to 11 percent, but dropped from 13 percent in the third quarter of 2011.

Tiger 21

 

Tiger 21: Fixed income see the largest drop in allocation

Over the long term study period, fixed income saw the largest drop in allocation. In the third quarter of 2011 19 percent of study respondents had their portfolio in fixed income.  After the second quarter of 2014 that number had dropped to 14 percent.  The biggest move out of fixed income occurred towards the end of 2011 as the current allocation remains unchanged on a quarter over quarter basis.

Commodity exposure, typically a hedge against inflation, dropped from a high of 3 percent in the third quarter of 2011 to just 1 percent of the portfolio in the second quarter of 2014.  Hedge fund exposure dropped from nine percent exposure in 2011 to 6 percent in the second quarter of 2014, seeing a 1 percent drop quarter over quarter.

Tiger 21

 

Allocation in real estate dropped to 21% in 2014

Looking on a longer term, year over year basis, public equities saw the biggest drop since 2008, when they accounted for 31 percent of the portfolio.  Real Estate dropped from 25 percent in 2007 to 21 percent in 2014, while private equity was just 12 percent of a portfolio in 2007 and now makes up 21 percent.

On the quarter, allocations to Hedge Funds were at 6%, which is a 1% decline from the prior quarter and off a few percentage points from the 9% level witnessed at the end of the second quarter of last year, the report noted. Public Equities declined by a percentage point during the second quarter as well. We have seen this allocation hover at levels between 23% and 24% over the past eight quarters. Real Estate also pulled back by 1%, bringing the allocation down to 22% during the second quarter.