Younger HNW investors are turning to alternatives
High-net-worth (HNW) investors between the ages of 21 and 42 are turning to alternative investments in search of higher returns, according to a study by Bank of America Private Bank.
The report stated that 80 per cent of HNW investors between the ages of 21 and 42 had turned to so-called alternative investments, which are defined as falling outside of traditional asset classes.
It also said that younger investors allocate three times more to alternative assets and half as much to stocks than other generations.
The online survey, conducted by independent market research company Escalent, found that 75 per cent of the younger group don’t believe “above-average returns” are possible solely from traditional stocks and bonds, compared to 32 per cent of investors over 43 years old.
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The bank used a wide definition for ‘alternative investments’, including equity, commodities, real estate, and other tangible assets.
However, it found that young investors think the greatest growth opportunities lie somewhere in the transformative digital asset space. Nearly half (47 per cent) said they had cryptocurrency holdings.
The bank polled 1,052 US-based HNW investors with at least $3m (£2.7m) in investable assets, excluding their primary residence, between May and June 2022.
The Bank of America Private Bank research also found that ownership of sustainable investments has doubled since 2018, from 12 per cent to 26 per cent of wealthy people.
Nearly three-quarters (73 per cent) of millennials compared to 21 per cent of older respondents said they used sustainable investments, while 72 per cent of all respondents agreed they can make a positive impact in the world.
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“Younger investors are far more likely to use alternative investment strategies to build their wealth,” said Jeff Busconi, head of private bank services at Bank of America. “Most don’t think it’s possible to get ahead by investing only in stocks and bonds anymore, so they’re turning to private markets and investing in tangible assets such as real estate and other direct investments.
“This group is also three times more likely to use sustainable investments than older generations and believe it is possible to create positive change and good financial returns at the same time. This younger generation is intentional in how they use their wealth including charitable giving. They make greater use of structured giving vehicles like Donor Advised Funds and charitable trusts.”
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