Have you ever wondered how the world’s richest invest their money? In a “Wealth Report” published in March this year, global real estate consulting firm Knight Frank explains in detail how huge wealth holders invest their money – from stocks and commercial real estate to passion investments (also known as “passion investments”).
The report points out that the world’s rich will store their funds in large technology groups or through cryptocurrencies and non-fungible tokens, with each asset class reaching an average percentage of the portfolio.
Mainly real estate investment
In this report, Knight Frank pointed out that in general, commercial real estate accounts for the largest proportion of the super-rich’s investment portfolio – the report also divides real estate investment into direct investment and indirect investment. In the average portfolio, 21% is directly invested in commercial real estate, while the other 13% of the investment is achieved through debt financing or real estate investment trusts.
The report shows that stock investments rank second – 26% of the world’s richest people’s portfolios are invested in the stock market, and in America, this proportion even reaches one-third. In 2022, Berkshire Hathaway, founded by the most famous American investor Buffett, invested a record $68 billion in stocks.
In the report of “Knight Frank”, 43% of the survey respondents confirmed that their clients invested in real estate stocks, while investments in the healthcare industry ranked second with a proportion of 35%.
The report pointed out that environmental factors are very important for how the rich choose the real estate they want to invest in – a total of 57% of people said that their clients would consider whether the industry contains green energy.
Bonds
As the most stable and least risky type of investment, it is not surprising that bonds account for 17% of the average portfolio of the world’s richest people. In this investment, investors mainly rely on promissory notes, which are usually issued by national governments or large companies – the issuer is obliged to pay interest on them at a specified maturity date (usually 1 to 30 years).
Black Rock, the world’s largest asset management company, said that as the US federal interest rate continues to rise, investors are increasingly looking at bond investments.
In a report published by Business Insider, the US newspaper, Knight Frank conducted a survey of more than 500 private bankers, wealth advisors and family offices, and the total wealth involved in these surveys exceeded 2.5 trillion US dollars. The report pointed out that the world’s richest people have lost more than 10 trillion US dollars in total, and also shared the opinions of the elites on how to build their investment portfolios.
Private equity
Business Insider reported that private equity refers to investing in a company that has not yet gone public, which also means greater investment risk, but the company has high growth potential. In the portfolios of the world’s richest people, an average of 9% is allocated to such investments. In addition, such venture capital can also include assisting in the establishment of start-ups.
American billionaire Peter Thiel became the first investor in Facebook in 2004 and invested $500,000. Just eight years later, when Facebook was listed on the stock exchange, he received a profit of $638 million.
Passion investments
The report pointed out that passion investments refer to investments in things that can be bought for enjoyment and value preservation, such as paintings, cars and valuables. Passion investments account for nearly 5% of the average investment portfolio of the world’s rich. In a survey conducted by Knight Frank, 59% of participants said that their clients are likely to buy art this year, followed by watches, while nearly a third of clients expect to buy classic cars. The survey also showed that 20% of such investments went to the luxury handbag market.
In 2017, Leonardo da Vinci’s painting “Salvator Mundi” became the most expensive painting ever – its transaction price reached $450.3 million.
Gold
The report pointed out that on average, the world’s richest people will put 3% of their investments on gold and consider gold to be the second safest type of purchase after real estate. “History shows that gold prices rise during recessions, from the Great Depression to the COVID-19 pandemic,” said James Jason, a financial analyst at commodity trading platform Mitred.
According to data released by the World Gold Council, demand for gold bars and coins increased nearly fivefold in 2022 from the previous year after Russia launched a military operation against Ukraine in February last year.
Cryptocurrency
According to the report, the world’s richest people regard cryptocurrency as the most volatile type of investment, but this investment still accounts for 2% of their average portfolio. In its report last year, Knight Frank pointed out that 18% of ultra-high net worth individuals hold some kind of cryptocurrency. At the same time, 34% of people believe that the market for “non-fungible tokens” has great potential, but 20% of people have changed their minds after the recent cryptocurrency crash.
Other investments
The report from Business Insider finally pointed out that the Knight Frank survey also involved a number of other investments, which accounted for 7% of the average portfolio, but the report did not specify what the category included.