These Ultra-Rich Investors Have Over $500 Million — Here’s Where They’re Putting Their Money
Written by
David Nadelle
Edited by
Nicholas Morine
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While it’s safe to say that multi-millionaires and billionaires have the means to bank differently from the average investor, it doesn’t hurt to learn a thing or two about where the very rich keep and build their money. Rather than sitting on their money or sticking to safe growth options, ultra-rich investors are putting their cash to work, according to a new Goldman Sachs survey.
Results of the second Goldman Sachs Family Office Investment Insights Report were released May 8, and show a shift away from cash allocations and toward “risk-on” public and private equity investments.
Conducted between Jan. 17 and Feb. 23, 2023, the survey polled not the rich, but the ultra-rich — 166 institutional family offices (privately held investment management companies for wealthy families) from around the world with a net worth of at least $500 million. Almost three-quarters (72%) have at least $1 billion to their family names.
Where Family Offices Are Putting Their Money
Per the report, the average family office asset allocation trends toward risk investments, with public stocks and private equity allocations leading the way. Going into 2023, here’s the average asset allocation of global respondents, per the Goldman Sachs “Eyes on the Horizon” report.
- Public market equities: 28%.
- Private equity: 26%.
- Cash/Cash equivalents (excluding U.S. Treasuries): 12%.
- Fixed income: 10%.
- Private real estate and infrastructure: 9%.
- Hedge funds: 6%.
- Private credit: 3%.
- Commodities: 1%.
Putting Cash To Work
Although family offices still allocate an average of 12% of their portfolios in cash and cash-equivalent holdings (more than your average everyday investor), 35% stated they will be moving away from doing so this year.
“We see that family offices carry more cash balances than other institutional investors,” said Meena Flynn, co-head of Goldman Sachs Global Private Wealth Management, in an online press-only discussion. “It’s to be opportunistic. They can cover expenses, maintain their lifestyle, maintain their cash balances to cover capital calls.”
Almost half of family office respondents (48%) plan on increasing their allocation to public market equities, 41% to private equity, 39% to fixed income, 30% to private credit — and 27% said they expect to increase their allocation to private real estate and infrastructure.
Choose an Alternative
Global family offices have 44% — a relatively high amount compared to other investors — of their portfolios invested in alternatives, such as private equity, hedge funds and other non-traditional asset classes, and expect to increase their allocation to alternatives even further.
Alternative investments — options that fall outside of traditional investments such as stocks, bonds, and cash — include a wide range of assets such as real estate, commodities, private equity, hedge funds, art, collectibles or cryptocurrencies.
Interestingly, 38% of family offices allot investments toward collectibles, including art (27%), wine (14%) and aircraft (14%). An overwhelming 71% cited their motivation for investing in collectibles as a passion rather than as a portfolio diversification device.
Cold on Crypto
Crypto allocations rose since the last Goldman Sachs bi-annual survey, from 16% in 2021 to 26% in 2023. However, the percent of those who plan on considering their crypto exposure decreased to 12% from 45% two years ago.
“While we have more family offices invested directly, we have less family offices interested,” Goldman Sachs partner Sara Naison-Tarajano said. “And that leads to a conclusion, which is really that family offices seem to have made up their mind around cryptocurrency.”
Keep Calm and (Financially) Plan On
While family offices have the assets to gamble and incur greater losses, there’s one way average investors can take page out of their playbook — keeping calm and sticking to your financial guns when the economy and markets are unpredictable.
“More broadly, considering the volatility and challenges of the past year, family offices have remained notably calm and their strategic asset allocations have changed only modestly,” said Tony Pasquariello, global head of hedge fund coverage for Goldman Sachs.
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