For those of you who read everything in the financial-oriented media, you know there is ongoing speculation about the investment products of choice for wealthy clients. Like most things, investment products cycle in and out of favor. Some of this is due to market conditions-remember the backlash against growth-style investing after the burst of the tech bubble and the subsequent flood of interest in fixedincome and "safer" equity strategies? Other times it's in response to environmental factors; after the sustained period of economic and geopolitical uncertainty in the early 2000s, the lack of market correlation offered by certain hedging techniques was appealing to many investors. And often it's simply media hype that drives investor behavior, or the availability of something new and different that prompts a change in portfolio holdings-two of the reasons behind the surge in popularity of exchange-traded funds.

Recently, a handful of studies have been released on similar subjects that garnered a fair amount of attention, principally due to the mistaken belief that highnet-worth investors no longer own or use mutual funds. Having studied the wealthy and their finances for more than a decade, it's clear that the portfolios of these individuals hold a wide variety of assets in an even broader array of structures-and this makes sense given their use of multiple advisors, the impact of aging on financial priorities, the established role of certain products in specific platforms and offerings, and the continued introduction of new financial techniques and strategies to address complex issues such as tax management or wealth transfer. We are, however, more interested in where the affluent plan to invest their assets moving forward, as that information is frequently an indication of how advisors can better help their clients and where growth will occur.

In a series of studies conducted between 2004-2006, we surveyed more than 1,100 wealthy investors about the importance of, and their interest in, specific investment products. As it turns out, there are several other things (in addition to those factors listed previously) that can contribute to how an investment product is perceived and embraced by the investing population, and our research with affluent investors reveals that a compelling and influential factor is an individual's overall level of wealth. To understand the role net worth plays in this process, we segmented the survey respondents into the following five groups:

Net worth between $500,000 - $1 million
Net worth between $1 million - $5 million
Net worth between $5 million - $10 million
Net worth between $10 million - $20 million
Net worth above $20 million

Each of his own 2

Key Findings
Not surprisingly, products that are broadly available and have low investment minimums such as mutual funds and ETFs are more appealing to lowernet-worth individuals (those with under $5 million in net worth) than they are to wealthier investors. One reason may be the heavy product coverage in media outlets that target this segment of investors. Another may be the widely accepted role that mutual funds and ETFs can play in retirement planning and college savings, two issues of little concern to wealthier individuals.

Simply put, mutual funds are no longer on the radar screens of investors with more than $5 million in net worth. Funds had their heyday in the latter part of last century, but most wealthy investors have had their fill and have since found other, more customized vehicles to meet their core investing needs.

ETFs have replaced mutual funds as the product du jour for the segment with less than $5 million. Both the number of ETFs and the total assets invested in them have risen sharply in the past few years, underscoring support for a structure that looks, smells and feels like an indexed mutual fund with stock-like

Fittingly, hedge funds (and hedge fund-of-funds) are of the greatest interest to the crowd with more than $10 million in net worth. Most hedge-related products are private placements and, as such, have net worth requirements for their investors and high minimums designed to preclude unqualified individualsfrom investing. The complementary effect a hedge fund can have on a portfolio has been, and will continue to be, valued by sophisticated investors as long as results are delivered. It's worth nothing that despite the frequent media coverage blasting the structure and size of hedge fund expenses, the superwealthy are willing to pay for a product or service as long as it has perceived value and delivers on expectations.

Direct investments and private equity have gotten traction only with the highest-net-worth investors. Both are complex (and often speculative) investments with low liquidity that are most appropriate for investors with higher levels of wealth, knowledge and risk tolerance. Additionally, these types of investment opportunities must often be sourced through an advisor or firm that works exclusively with sophisticated investors. Interestingly, currency investing was ranked similarly by investors at all levels of wealth, appealing to roughly one-quarter of investors. Arbitrage is a specialized investment technique that carries unique risks. As such, it will likely have a finite audience of potential investors now and in the future.

Finding The Right Fit
It's safe to say that, despite their intangible nature, investments are no different from many consumer products in that distinct segments of buyers respond in different ways to each product. And it is those reactions that help marketers identify potential target markets for their products. For instance, products with smaller price tags will always have a larger audience of potential purchasers. In the consumer world, this means that many more people can (and probably will) buy a $10 bottle of wine than one with a $160 price tag. When translated into the realm of investment products, this means that many more people can (and probably will) buy an ETF with a $1,000 minimum initial investment than a hedge fund that requires $10 million to invest. Furthermore, buyers with specific needs will gravitate toward products that meet those needs. A family of six is more likely to buy a minivan or an SUV that can comfortably seat everyone simultaneously than a sports car without a backseat. And individuals who need to harvest tax losses probably won't spend much time evaluating investments that create short- or long-term gains.

Simply put, mutual funds are no longer on the radar screens of investors with more than $5 million in net worth.

The varying levels of interest expressed by the respondents of our survey are neither an indictment nor an endorsement of specific investment products, but rather a reinforcement that wealthy individuals, especially very wealthy individuals, have different interests, preferences and needs than less wealthy people. Advisors and other providers to the ultrawealthy can use the products and services that pique curiosity as a dooropener, and once a relationship is established find the products and services that truly address the problems a client has and provide the solutions a client lacks.