Today’s market has no precedent. Very few are aware of one little known consequence of this market, a lot of people have made more money than ever before. In fact, many have become wealthier during the past year than the previous 10. The natural questions are; who are these people and what did they invest in?
This group is the top 1% of wealthy Americans, smart money. Regardless of their economic status; this group didn’t invest in anything you couldn’t have invested in. The difference is knowledge, not money.
74% of Affluent Investors Diversify into Alternatives
Almost three-fourths of affluent investors—the wealthiest 1% of Americans—have turned to alternative investments as a means of surviving in today’s troubled markets, according to the January 2008 Phoenix High-Net-Worth Market Insights report.
Alternative investments, alternatives for short, are investment products other than traditional investments, such as stocks, bonds and cash equivalents. Real estate and private equity are among the most common investments of the top 1% of wealthy Americans comprising a combined 65% of their alternative investment holdings.
Affluent Investors Prefer Real Estate & Private Equity Alternatives
As alternative investments, real estate and private equity offer the following advantages over traditional Wall Street investing:
· Low Correlation to Wall Street Performance
· True Portfolio Diversification
· Targeting Specific Niche Investment Opportunities
· Power of Leverage
· Potentially Higher Returns
· Passive Income Returns
· Strong Equity Growth
· Tax Advantages
A record $686 billion of private equity was invested globally in 2007, up over a third on the previous year and more than twice the total invested in 2005. Private equity fund raising also surpassed prior years in 2007 with $494 billion raised – up 10% on 2006. Despite growing turbulence in the financial markets, private equity activity has remained strong.
A 2006 Survey by Venture Economics, SCM showed that Private Equity substantially outperformed the S&P 500 by 20% over a 1 year period and by 9% over a 10 year period measured by IRR.
Private Equity Substantially Outperforms the S&P 500
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