The ultra-wealthy-those with $25 million or more in net worth-are investing more heavily in alternatives than ever before and expecting larger rates of return, according to a new study by Spectrem Group.

Currently, the ultra-wealthy are investing an average of 25% of their total investable assets in alternatives, compared to 20% in 2010 and 16% in 2007, according to Spectrem's $25MM+ Investor 2012 report.

Hedge funds are owned by 47% of $25 million-plus households, while stocks and bonds, including restricted stocks and options, are down to 18% of total investments from 20% in 2010 and 21% in 2007.

These investors expect their returns to exceed the market, with one-quarter expecting an annual rate of return of at least 16% and 11% expecting returns greater than 25%, the report said.

At the same time, the investors are taking action to ward off tax increases. Six out of 10 are investing in tax-free bonds, almost as many as are revising their estate plans, and 55% are meeting with tax planners.

Nearly one-quarter say they are considering a change of legal residence to a state that does not have a state income tax; 47% are increasing their charitable contributions; and 28% are buying tax-advantaged life insurance.

Fear of tax increases and how Congress will deal with what the expiration of the Bush tax cuts on income and capital gains probably are contributing to the investment and tax policy changes, said Spectrem. There were 107,000 households in the U.S. with $25 million or more in net worth at the end of 2011.

"After the slow growth of the past few years, coupled with the potential of a sizable tax hit, the vast majority of these wealthy investors are seeking out-sized investment returns," said George H. Walper Jr., Spectrem Group president.

The study showed the largest group of the wealthy with $25 million or more are business owners (27%) and more than half are still working. With a mean age of 60, and 38% under 55 years of age, the ultra-wealthy are younger than those with between $5 million and $25 million, who have a mean age of 67, and younger than those with $1 million to $5 million, who have a mean age of 63.

-Karen DeMasters