Affluent Families Put Cash Back Into Play
Affluent families have coped with the global financial crisis by converting their assets into cold hard cash, but they're starting to warm up to the idea of putting this money into play, according to one industry observer.
Moreover, they're taking a more active role in dictating where their assets are invested, he said.
"I think definitely their world view is that things are getting better," said Norman Jones, CEO of WealthTouch, which provides wealth-reporting services for more than 400 high-net-worth families, with average account sizes of about $170 million.
Wealthy families reacted to the 2008 crash by holding more of their assets in cash and spreading out the rest of their investments among a wide array of custodians, managers and investments, he said.
"The amount of cash reserves families have on hand now is almost double what they had coming into the financial crisis," Jones said. "There is a lot of cash on the sidelines waiting to invest because of nervousness."
Based on his conversations with clients, Jones believes the affluent are poised to put their cash back into long-term investments. One of the primary areas they're looking at, he says, is equities-specifically blue chips.
Unlike more mainstream investors, who appear to be gravitating to investments such as gold and commodities, the affluent-and the family offices and private banks that serve them-are showing an interest in the stocks of big, healthy, multinational companies.
These types of blue-chip stocks, he said, are viewed by the wealthy as safe, long-term holdings that provide international exposure.
"It's not speculative. This is buy-and-hold stuff," he said. "They want to buy Coca-Cola and basically look at it in three years' time."
There is also continued interest in hedge funds and private equity, but wealthy families are more discriminating now, wanting to ensure that the hedge funds they use are actually using hedging strategies.