Direct vs Fund Investments - HNW Preferences; New Report Launched

Globally, 44% of HNW wealth is held via funds as opposed to directly. However, there are significant regional differences when it comes to investment preferences. For example, HNW investors in the US, and to a lesser extent in Western Europe, are significantly more likely to invest in funds than their peers in Central and Eastern Europe, Asia Pacific, and the Middle East. Furthermore, while equity funds prevail across the globe, they are particularly prominent in the West. There are also strong differences across asset classes when it comes to the drivers to invest in funds. While asset diversification benefits feature strongly across all asset classes, lack of time to research direct equity investments is a key driver for fund holdings in the equity space, while an expectation of better returns motivates HNW investors to opt for alternative investment funds as opposed to direct holdings.

• Diversification benefits are the number one driver why HNW investors opt for funds as opposed to direct holdings, and in light of ongoing market turbulences, wealth managers would do well to provide a strong range of funds that offer not only exposure to different industries, but also geographies and asset classes.
• No longer the reserve of institutional or mass affluent investors, exchange-traded funds (ETFs) form an increasingly large part of HNW investors’ portfolios, and being able to offer a wide range of such funds next to more sophisticated products is becoming more and more important.
• A large chunk of HNW wealth is locked up in direct property; wealth managers would do well to convince their clients of the benefits of property funds so as to increase their fee income.
• While HNW investors tend to be well-diversified across asset classes and geographies, industry diversification is equally important – something wealth managers should discuss with their clients.

Direct vs Fund Investments: HNW Preferences draws on our 2015 Global Wealth Managers Survey to analyze HNW investment preferences across the globe. It breaks down HNW investors’ fund portfolio by asset class and type of investment and contrasts fund holdings to direct holdings. It furthermore provides insight into why investors opt for funds as opposed to direct holdings.

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