High Net Worth (HNW) Asset Allocation Trends 2021

High Net Worth (HNW) Asset Allocation Trends 2021

Summary

Drawing on our 2020 Global Wealth Managers Survey, this report analyzes HNW asset allocation strategies in 19 key markets. In particular, it examines the drivers behind investment choices now and over the next 12 months.

While most major markets have bounced back after COVID-19-induced turbulence, uncertainty remains - which is benefitting cash and near-cash investments. Meanwhile, HNW allocations to equities have dropped significantly. Capital appreciation opportunities remain an important investment driver, but our data shows that other drivers are moving further into the foreground. Next to diversification benefits, investors are placing increased importance on a regular income stream - be it in the form of regular interest income or dividends. In fact, the search for yield has shifted to other corners of financial markets, such as commodities and alternative investments.

Scope

- The proportion of HNW wealth allocated to equities dropped from 40.8% in 2018 to 20.9% in 2020.
- With the exception of alternative investments, investors focus has shifted to fund products in order to further diversify their holdings.
- While HNW bond allocations have fallen notably, there has been an internal reshuffle within the average HNW fixed-income portfolio. This has benefitted high-yield bonds, which now constitute 3.2% of HNW bond holdings.

Reasons to Buy

- Learn how COVID-19 and resulting market upheaval has affected investment behavior in the HNW space.
- Discover investment trends and adjust your service proposition based on a detailed understanding of HNW investors investment preferences.
- Identify how to best promote investment products by learning what is driving investment choices.
- Learn how and why investment preferences will change over the next 12 months.
- Understand the effect increased volatility can have on investor behavior and how to minimize the risk of customers changing providers.
- Give your marketing strategies the edge required to capture new clients using insights from our data on HNW investment drivers.

1. Executive Summary
1.1 Market overview
1.2 Key findings
1.3 Critical success factors
2. Asset Allocation Preferences
2.1 Increased volatility has shaved roughly a fifth off the size of HNW equity holdings since 2018
2.2 Detailed analysis shows increased reliance on fund products
2.3 HNW investors expect ESG products - be it basic fund products or more sophisticated alternatives
2.4 COVID-19 had a major effect on investor behavior, but there are significant segmental differences
3. HNW Investment Drivers
3.1 Following the pandemic, uncertainty is the core issue to address in 2021 investment strategies
3.2 Future investment opportunities: A wait-and-see-attitude and liquidity concerns are driving cash and
investments
3.3 A regular income stream: HNW investors are looking for stable returns amid volatile market conditions
3.4 Diversification: Risk management is becoming more important as the VIX impresses with decade-
3.5 ROI: Alternatives have become more than a diversifier as investors bet on returns that exceed traditional
3.6 Risk aversion: COVID-19 had a major impact on investors willingness to take risk and their investment
4. Appendix
4.1 Abbreviations and acronyms
4.2 Supplementary data
4.3 Definitions
4.4 Methodology
4.5 Secondary sources
4.6 Further reading
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List Of Tables

Table 1: HNW investment drivers by country and region: Equities, 2020
Table 2: HNW investment drivers by country and region: Cash and near-cash investments, 2020
Table 3: HNW investment drivers by country and region: Bonds, 2020
Table 4: HNW investment drivers by country and region: Property, 2020
Table 5: HNW investment drivers by country and region: Commodities, 2020
Table 6: HNW investment drivers by country and region: Alternatives, 2020

List Of Figures

s
Figure 1: HNW equity holdings trended down over the past two years
Figure 2: An increase in volatility is driving demand for fund products
Figure 3: REITs constitute 4.1% of global onshore HNW holdings, but this share will rise
Figure 4: Private equity HNW holdings are forecast to increase to 4.4% of onshore holdings by the end of 2021
Figure 5: Access to alternatives is a challenge for HNW investors outside of North America
Figure 6: Globally, HNW investors allocate 1.2% of onshore wealth to cryptocurrencies
Figure 7: North America leads the way in terms of equity investments
Figure 8: 71% of wealth managers offer SRIs
Figure 9: Entrepreneurs tend to have strong knowledge of financial markets
Figure 10: There is strong correlation between financial savviness and openness to new investment ideas
Figure 11: Cash and near-cash products are forecast to experience the strongest rise in demand
Figure 12: Liquidity considerations are of particular importance in countries with sizable entrepreneur communities
Figure 13: HNW investors are looking for a regular income stream
Figure 14: COVID-19 has taken its toll on rental yields
Figure 15: HNW investors are moving away from bonds as a diversifier
Figure 16: HNW investors are looking to diversify their holdings internationally
Figure 17: Private equity outperformed public markets over a 10- and 20-year horizon
Figure 18: Gold performed strongly over the past three years
Figure 19: A perception of safety as a driver for property investments is particularly key in France and South Africa

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