Yana Iskayeva | moment | Getty Images
The super-rich live in a different world and their investment strategies differ significantly from the portfolio of the average investor.
“Although there is no official threshold, hundred millionaires or individuals with a total net worth of over $100 million are a good benchmark for entry into the 0.001 percent club,” said Kevin Teng, CEO of WRISE Wealth Management Singapore, a wealth firm for ultra-high-net-worth private customers.
According to WRISE, the number of hundred millionaires worldwide is approximately 28,420, mostly concentrated in New York City, the Bay Area, Los Angeles, London and Beijing.
In the United States, if you buy an NFL team, you get a knighthood.
Salvatore Buscemi
CEO of Dandrew Partners
“These cities have robust financial infrastructure, vibrant entrepreneurial ecosystems and lucrative real estate markets, making them attractive destinations for the super-rich,” Teng told CNBC.
And this demographic, which “embodies extreme wealth,” is selective when it comes to investing, Teng said.
“Today you don’t invest in things that get rich, go fast or are illiquid. “That means, for example, that they don’t really invest in publicly traded stocks,” said Salvatore Buscemi, CEO of Dandrew Partners, a private family investment firm.
“They actually don’t even invest in crypto, believe it or not,” Buscemi told CNBC over Zoom. “They want to preserve their heritage and wealth.”
1. Real estate
As a result, Centimillionaire portfolios often feature “very strong, stable real estate,” Buscemi said. These wealthy individuals gravitate towards “trophy asset” Class A properties or investment grade properties, typically built within the last 15 years.
Port of Monaco on the French Riviera.
Silvain sonnet | Getty Images
Michael Sonnenfeldt, founder and chairman of Tiger 21 — a network of high-net-worth entrepreneurs and investors — told CNBC that real estate investments typically make up 27% of these individuals’ portfolios.
2. Family offices as investment vehicles
People with such wealth generally have their money managed by single family offices, which take care of everything including their inheritance, household bills, credit cards, immediate family expenses, etc., said Andrew Amoils, an analyst at global wealth information firm New World Wealth.
“These family offices often have charitable foundation arms and venture capital arms that invest in high-growth startups,” Amoils said.
The number of family offices worldwide has tripled since 2019, reaching over 4,500 worldwide last year with an estimated total assets of $6 trillion.
3. Alternative investments?
Ultra-high-net-worth individuals are also exploring the potential purchase of shares in professional sports teams, Dandrew’s Buscemi said.
“This is a very, very isolated group to get into that requires a lot more than just money,” he said.
The exclusivity is a big appeal because these wealthy individuals want to associate with people of similar status, Buscemi explained. Owning a stake in a sports team is a way for these individuals to legitimize their status, he said.
Owner Jerry Jones of the Dallas Cowboys welcomes fans to training camp at the River Ridge Complex on July 24, 2021 in Oxnard, California.
Jayne Kamin-Oncea | Getty Images Sports | Getty Images
“In the United States, if you buy an NFL team, you get knighted,” he said, just as American businessman and billionaire Jerry Jones bought the Dallas Cowboys in 1989.
WRISE’s Teng also found that 0.001% of individuals are paying more attention to fixed income, personal loans and alternative investments. He said private credit is becoming more important as investors look for sources of return outside traditional markets.
“This trend reflects a growing demand for non-traditional assets that offer unique risk-return profiles,” Teng said, noting that alternative investments include venture capital, private equity and real assets.
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2024-04-22 01:55:32
www.cnbc.com
