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Featured Advisor



Ed Meek
CEO/Investment Advisor

Edge Portfolio Management

City:Winfield

State: IL



BIOGRAPHY:
At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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High Net Worth Wealth Management: Alternative Investments

Alternative investments play a significant role in high net worth wealth management. Learn more about the products.

| BY Adriana Reyneri

Alternative investments – products other than stocks, bonds or cash – play a significant role in high net worth wealth management, despite the complexity and relative lack of liquidity of the products.

High net worth wealth management strategies are likely to include alternative investments because alternatives add valuable diversification to a portfolio. According to the Institutional Advisor Services Group, or IASG, “Alternative investments are favored mainly because their returns have a low correlation with those of standard asset classes.”

Nearly two-thirds (63 percent) of individuals with $15 million to $25 million in investable assets own Real Estate Investment Trusts  or REITs, making the products one of the most popular alternative investments for high net worth wealth management, according to a Millionaire Corner study conducted in the fourth quarter of 2011. The average REIT balance of these high net worth investors  is close to $1.2 million. (Alternative mutual funds provide another tool for diversification.)

A REIT enjoys special tax status that exempts the trust from corporate taxes, according to IASG, but in return a REIT must distribute 90 percent of its income in the form of taxable dividends to shareholders. REITs can be publicly or privately held. The trusts most commonly own and operate commercial real estate, though some finance real estate.  

Another 63 percent of investors with $15 million to $25 million have invested in a limited partnership and the average investment is roughly $1.1 million. A limited partner has limited liability for the debts of the partnership and has no management authority, but receives a return on his or her investment according to the terms of the partnership agreement.

Precious metals are an increasingly popular alternative investment used in high net worth wealth management. Millionaire Corner research shows that 55 percent of investors with $15 million to $25 million own precious metals, including gold, and have an average balance of $858,000.

Private equity is another common alternative investment used in high net worth wealth management. More than half (51 percent) of investors with $15 million to $25 million own private equity with an average balance of nearly $1.2 million, according to millionaire corner research. IASG explains that private equity consists of securities in companies that are not publicly traded.

Nearly 45 percent of investors with $15 million to $25 million own commodities, another alternative investment increasingly popular for high net worth wealth management.  Just under 40 percent of investors with $15 million to $25 million also own hedge funds, venture capital and collectibles. (Millionaire Corner research shows that art is the favorite collectible of affluent investors, and plays a niche role in high net worth wealth managment.)