Wealthy families prefer private equity

A recent survey conducted by the Institute for Private Investors has shown for a third year in a row that wealthy families are choosing alternative investments over stocks.

Wealthy families prefer investing in alternative asset classes over public equities, according to a study done by the New York-based Institute for Private Investors.

About 49 percent of survey participants this year plan to increase their holdings in private equity, while only 4 percent will decrease their allocations.

Institute for Private Investors

As reported in the Wall Street Journal, the survey found that wealthy families on average allocated approximately 42 percent of their portfolios in 2004 to alternative investments, including private equity, venture capital, hedge funds and real estate. Only about an average of 37 percent of portfolios were dedicated to public equities.

About 49 percent of survey participants this year plan to increase their holdings in private equity, while only 4 percent will decrease their allocations. Private equity accounted for about 5 percent of respondents’ portfolios.

The survey compiled responses from 81 of the institute’s member families who have a minimum of $10 million in assets. About 40 percent of the institute’s 300 members have at least $200 million in assets.

As more families these days become wealthy, the private equity asset class stands to gain from increasing allocations. According to a separate study by the Boston Consulting Group, the US continues to lead the world in creating new millionaires. The number of US households with liquid assets of $20 million or more is increasing by 3,000 per year.

Formed in 1991, the New York-based Institute for Private Investors provides educational and networking resources for its member families, all of whom have substantial assets, and their advisors. According to its Web site, the organisation’s primary goal “is to change the way investors work with advisors and advisors work with investors, for the benefit of both.”