The year 2010 was an anomaly. Usually, the members of the Institute for Private Investors, a country-club type of investment group that only welcomes you if you have $30 million in investable assets, beats the S&P 500 benchmark in terms of average annual returns. Looking at the latest ten-year average return, that’s what we see. While the S&P 500 returned an average of 3.6% annually over this time, this group saw an average return of 6%.
In this group, the investment philosophy is more aggressive than that of the S&P 500; with more money available to invest, investors have better access to unique investment opportunities, like start-up businesses. The other day I mentioned how diversification needs are different for people who have enough wealth to control a company, and this is just another example of how investing rules apply differently depending on your financial condition.
Here is what the super-rich are concerned about.
“Sophisticated private investors are essentially early adopters who typically lead the market,” said IPI founder Charlotte Beyer. About 42 percent of respondents to the April survey said they held some alternative investments in 2010. Hedge funds, on average, comprised about 19 percent of their portfolios, little changed from 2009 but off the peak of 24 percent reported in the group’s 2006 survey.
There is more information in the Reuters article outlining the survey and investment results.
Updated September 8, 2016 and originally published May 19, 2011.