HNWs flock to alternatives for higher returns away from stock market
High-net-worth (HNW) individuals have maintained their appetite for alternatives as a way of diversifying from public markets, research has found.
UK private client alternative investment specialist Connection Capital surveys its HNW and ultra HNW clients on an annual basis.
The latest survey found that four in 10 are allocating more than 20 per cent of their portfolio to alternatives.
More than three quarters (76 per cent) said they are planning to put more than 10 per cent of their portfolio into alternatives, which Connection Capital said reflects how mainstream the asset class has become.
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Alternative investments include private equity, private debt, commercial property and alternative fund strategies.
The two main reasons cited for allocating to alternatives were diversification from quoted markets (73 per cent) and higher returns (69 per cent).
Despite the macroeconomic uncertainty over the past 12 months, the results of the survey were consistent with last year’s survey, suggesting investors now view alternatives as a core part of their portfolio.
When asked about the greatest threat to alternative investment performance over the next 12 months, higher interest rates were the most frequently cited concern, by 62 per cent of respondents.
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“Public market volatility and lacklustre returns continue to drive private investors to alternative investments and private markets,” said Claire Madden, managing partner at Connection Capital.
“And while institutional fundraising has slowed down, largely influenced by the denominator effect, private investors remain keen to allocate, especially to private equity.
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“The wider fundraising environment means we have seen, and continue to see, fund managers increasingly open to raising capital from private investors both for fund commitments as well as single asset co-investment opportunities.”
Connection Capital connects private, professional investors with direct private equity transactions and alternative investment funds. It has raised over £500m of funds from its clients, which has been invested across a diverse portfolio including Virgin Wines, Tempcover, and 23.5 Degrees, the UK’s first Starbuck’s franchise, as well as private fund strategies operated by institutional grade private managers such as CVC, 17Capital, InvestIndustrial and Enact.