Investor Survey Gives Insight into Behavior and Attitudes Towards Alternatives

December 10, 2018
By Millennium Trust
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All of us – no matter our situation – want to ensure our financial future is secure. Although many investors are aware that employing a diversified approach to investing will help protect your assets, they may not fully understand that traditional means may not withstand market volatility.

Our recent, annual survey reveals that though many high-net-worth (HNW) investors have continued to express an interest in alternative investments, many seem hesitant to invest new money.

The results also reveal interesting insights into participants’ existing investing behavior, as it pertains to different types of alternative investments.

HNW individuals continue to show interest in alternative investments but aren’t taking action

As alternative investments become more mainstream – private equity and real estate being the most popular – HNW investor interest seems to have reached an all-time high. According to our survey, a staggering 90% of people are inclined to invest in alternative assets.

What’s also telling is that 65% of people surveyed stated they would be willing to invest up to 25% of their total investments in alternatives. That’s an increase 5% of respondents compared to our 2017 survey.

Despite these positive attitudes towards investing in alternatives, not much action has resulted with investors. Perhaps what’s holding investors back from investing is the lack of knowledge surrounding alternatives and the ways you can invest (e.g. in a self-directed IRA).

Fewer people may be having conversations with financial advisors about alternative investments, in general, but investors may not have more incentive to engage in conversations on alternatives when the market shows volatility, as it has in recent weeks. More than one-third of respondents report not speaking about alternatives with their advisor in the past year, which is a 25% increase over 2017.

Individual investor portfolios remain stable with no new traditional investments

You may think that investors aren’t taking action on alternative investments because they are putting their money into traditional assets, like stocks, bonds and mutual funds – but that’s actually not the case. In fact, less than half of respondents put their money to work in individual stocks in 2018 – a decline of 10.6% over those surveyed in 2017– and only 17% purchased foreign stocks.

These results don’t mean that HNW individuals aren’t investing at all, however. They seem to be keeping their existing investments where they are. Overall, 35% of investors stated they didn’t purchase any new investments, while 25% haven’t sold any assets in 2018. Due to high valuations and the potential for a market slowdown, investors most likely don’t want to put additional capital to work.

Real estate remains the leading alternative investment

Most HNW investors are at least somewhat familiar with real estate as a type of investment. In fact, almost half of those surveyed have a minimum of 25% of their total assets in some sort of real estate investment. According to our findings, the most popular form of real estate is single-family rental properties – with 73% of those that invest in real estate already investing in this –  though it’s not known if these assets are invested in a self-directed IRA.

It could be the rising interest in alternative investments, but 9 in 10 respondents have at least some interest in real estate. The good news is that there are plenty of ways to invest in real estate, including commercial and residential properties, as well as real estate crowdfunding platforms.

Millennium Trust is the ultimate educational resource on alternative investments

Despite the high interest and awareness of some of the alternative investment options available, more than 20% of those surveyed do not have familiarity with hedge funds or private equity—and those who indicated extreme familiarity with these asset classes went down from last year. These findings suggest that, overall, increased advisor engagement and education could help meet the needs of HNW investors interested in alternatives.

Millennium Trust is here to help investors discover the basics of alternative investing by starting the conversation on various alternative asset classes and guiding investors through a simplified and streamlined process. Visit MAIN, our investment network, to learn more about alternative investment options.

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Survey Data Source: August 2018 Millennium Trust survey of 500 individuals age 30 and over with household income of $200,000+ who have invested in stocks, bonds or commodities through an IRA or SEP-IRA.

The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.

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