HNW Individuals At Ease With Private Equity, Real Estate - Study

Tom Burroughes

16 April 2018

The majority (more than 70 per cent) of high net worth individuals in a recent have shown big inflows into private capital markets in recent years, albeit with some falling off in the past 12 months as the sectors seek to absorb the “dry powder” of money not yet committed. There has also been rising caution about rising valuations (see story here).

Valuations have been rising, but leverage involved in private equity deals today, for example, is far less than the levels seen prior to the 2008 crash, Claire Roborel de Climens, global head of private and alternative investments at the French bank’s wealth arm, told this publication yesterday. At BNP Paribas, the firm favours, for example, US large-cap firms as private equity targets in contrast to smaller-size firms, because of more attractive valuations, she said. Also, the bank in general prefers clients to hold a blend of different investment vintages to spread risk, she said.
“Over the past 12 months, we have seen a significant pick-up in investor appetite for private equity and private real estate. In this still low interest rate environment, investors are looking for double-digit returns to optimise their portfolio’s risk-return profile,” de Climens said.

Among other findings, the poll showed that more than 60 per cent of respondents said they were familiar or very familiar with private equity/private real estate. On average, active investors in these assets hold 16.3 per cent of all their portfolios in these assets, with 15.8 per cent of it in cash and 15.3 per cent in stocks. More than 40 per cent of the respondents said they planned to move money into these assets “in the near future”.

The most compelling reason for entering these assets were the opportunities available (55 per cent of respondents said this was a reason); 35 per cent said they liked the areas because it balanced a wider portfolio; 32 per cent said they had been advised to invest by an advisor.

Fieldwork for the survey was conducted in nine countries across Europe, Asia and the Gulf region of the Middle East. Some 65 per cent of respondents were male; 21 per cent were Baby Boomers, 61 per were GenX/Y and the rest were Millennials (under 35).