High Net Worth (HNW) Asset Allocation Trends 2022
2021 was a good year for equities, and by extension, for HNW investors. While HNW allocations to the asset class have decreased notably since 2018, they increased again over the course of the year and are markedly higher than among other investors segments.
Uncertainty is a key investment theme as investors are scrambling to adjust their portfolios to changing investment conditions as we enter a new economic cycle. Higher inflation amid slower growth has brought an end to the availability of cheap money and inflated asset prices. Returns are harder to come by and investors are exploring new corners of financial markets, while at the same time building up cash reserves to ensure liquidity. Over the coming year, alternatives will be the clear winners, but wealth managers will also have to contend with higher cash and near-cash allocations.
High Net Worth (HNW) asset allocation market research report analyzes HNW asset allocation strategies in 19 key markets, with a particular focus on the drivers behind investment choices now and over the next 12 months.
What are the key trends in the HNW asset allocation market?
Some of the key trends in the HNW asset allocation market are as follows-
ETFs are expected to overtake HNW mutual fund holdings in the near term
A desire to achieve further diversification has resulted in greater uptake of indirect holdings, especially in the equity space. In 2018, HNW investors allocated a significant share of their equity portfolio to funds; by 2021 this proportion had risen. While diversification represents a key driver, the reasons behind this trend are multi-faceted.
Demand for thematic ETFs has skyrocketed but advisors need to ensure client portfolios remain diversified
The thematic fund sector has exploded in recent years. According to Morningstar (as seen in Wealth Professionals), thematic fund industry AUM more than tripled between 2018 and 2021, with global thematic fund assets reaching $806 billion at the end of 2021.
In particular, cybersecurity, robotics, blockchain, artificial intelligence, and other tech themes are in high demand. While the premise of providing exposure to long-term structural trends is a sensible one, many tech companies have been trading at inflated values. The transition from growth to value stock as markets respond to tighter monetary conditions has seen prices dive. Wealth managers need to ensure they are not just chasing fads but remain well diversified across industries.
Shifts in global monetary policy will impact property allocations
Transitioning investors away from direct holdings to fund products will be key in these markets. Not only will this benefit wealth managers’ fee income, but tighter monetary conditions put a halt to strong property price growth – especially in the residential sector. This makes diversification even more important. The returns different types of real estate yield vary strongly over an economic cycle, offering a strong incentive to promote fund products, which provide exposure to different types of real estate. For example, residential property tends to be the least cyclical, followed by office buildings.
ESG is infiltrating all parts of wealth management
Growing awareness of social responsibility and sustainability have driven demand for ESG investments across all affluent bands, including HNW investors, with approximately half of wealth managers reporting very strong or quite strong HNW demand. Yet the financial services industry remains a laggard.
What are the key asset allocation preferences in the HNW asset allocation market?
The key asset allocation preferences in the HNW asset allocation market are alternatives, commodities, property, cash and near cash, bonds, and equities. HNW equity allocations trended up again, reflecting a rebound in the market.
HNW asset allocation market, by asset allocation preferences
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Market report overview
| Key asset allocation preferences | Commodities, Property, Cash And Near Cash, Bonds, and Equities |
Scope
- Demand in the equity space is shifting towards defensive stocks as investors are abandoning growth stocks due to mounting inflationary concerns.
- 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 3.8% of HNW bond holdings.
Reasons to Buy
- Learn how inflationary concerns and resulting market upheaval are affecting investor behavior in the HNW space.
- Discover investment trends as we enter a new economic cycle 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.
- Give your marketing strategies the edge required to capture new clients using insights from our data on HNW investment drivers.
Key Players
Table of Contents
List of Tables
List of Figures
Frequently Asked Questions
The key asset allocation preferences in the HNW asset allocation market are alternatives, commodities, property, cash and near cash, bonds, and equities. HNW equity allocations trended up again, reflecting a rebound in the market.
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