The 2024 World Wealth Report by the Capgemini Research Institute provides a comprehensive analysis of the asset allocation trends among high-net-worth individuals (HNWIs) from January 2023 to January 2024. According to the report, HNWIs, defined as individuals with at least $1 million in wealth, made notable shifts in their investment strategies over the past year.
At the beginning of 2023, HNWIs allocated their assets as follows: 34% in cash and cash equivalents, 23% in equities, 15% in fixed income, 15% in real estate, and 13% in alternative investments such as commodities, currencies, private equity, hedge funds, structured products, and digital assets. By January 2024, there was a discernible change in these allocations: cash holdings decreased to 25%, equities slightly declined to 21%, fixed income rose to 20%, real estate remained stable at 19%, and alternative investments increased to 15%.
Elias Ghanem, global head of Capgemini Research Institute, attributed the decrease in cash allocation to a strategic shift towards growth-oriented investments rather than risk minimization. He noted that the high levels of cash seen in the previous year were largely a response to uncertainty, whereas 2024 reflects a renewed focus on wealth growth among HNWIs.
Greg Gatesman from UBS highlighted that HNWIs, particularly those with assets exceeding $10 million, prioritize fixed-income instruments and tax optimization in their wealth-management strategies. Strategies like bond ladders, which involve staggered maturity dates for bonds, are favored for their stability and tax efficiency.
Moreover, alternative investments have seen a steady increase in allocation among HNWIs over the years, reflecting a broader trend towards diversification and seeking higher returns in less traditional asset classes.
Looking ahead, industry experts like Pierre Ramadier from BNP Paribas Wealth Management anticipate a continued interest in fixed-income instruments and private credit for wealth preservation, especially amidst expectations of declining interest rates and controlled inflation in 2024. For wealth growth, private-equity investments are considered attractive due to their potential for higher returns compared to traditional equity markets, despite their inherent volatility.
The insights from the report were based on a survey of 3,119 HNWIs across North America, Asia, and Europe, conducted in January 2024. This comprehensive view into HNWI investment behavior underscores their evolving strategies in response to market conditions and economic outlooks.
In conclusion, the 2024 World Wealth Report illuminates how HNWIs are adapting their investment portfolios to navigate current economic dynamics, emphasizing a blend of growth-oriented and wealth-preservation strategies tailored to their financial goals and risk tolerance.