Ultra-high-net-worth families that own businesses are more comfortable investing in illiquid companies than families that no longer have a business, according to a new survey by the Family Office Exchange (FOX), a global network of wealthy families and their advisors.
The Private Wealth Management Survey, conducted in conjunction with the University of Chicago Booth School of Business, compared the asset allocations of business owning families and those that formerly owned a business.
The largest share of assets for both groups were in domestic equity, with 21 percent for the business owners and 25 percent for the former business owners. But the two groups diverged on some other asset classes.
Real estate got the second highest amount of assets for the business owners at 17 percent, while the former business owners invested only 9 percent of their assets in real estate. Business owners invested 12 percent of their assets in direct private equity compared to only 4 percent for the former owners.
By comparison, the former owners put 11 percent of their assets in hedge funds while business owners put only 4 percent of their assets in hedge funds. The second largest allocation of assets for former business owners, following domestic equities, were in fixed income with 23 percent. Business owners put 16 percent of their investments in fixed income.
“The research suggests that business owning families have more of a preference for tangible assets over which they have more control,” says Sara Hamilton, CEO of FOX.
The report was based on a survey of students in the Chicago University Booth School of Business Private Wealth Management course. Fifty-five percent of the participants had more than $26 million in assets.