The 2024 World Wealth Report from the Capgemini Research Institute offers a detailed analysis of how high-net-worth individuals (HNWIs) are allocating their assets, providing insights into significant changes observed over the past year.
High-net-worth individuals, defined as those with at least $1 million in wealth, have traditionally employed a diverse range of investment strategies to preserve and grow their assets. At the beginning of 2023, the typical asset allocation among HNWIs included 34% in cash and cash equivalents, 23% in equities, 15% in fixed income (such as bonds and fixed annuities), 15% in real estate, and 13% in alternative investments (comprising commodities, currencies, private equity, hedge funds, structured products, and digital assets).
However, by January 2024, there was a noticeable shift in these allocations. Cash and cash equivalents decreased to 25%, while equities slightly declined to 21%. Fixed income increased to 20%, real estate remained steady at 19%, and alternative investments rose to 15%. This shift reflects a broader trend among HNWIs towards reducing cash holdings and diversifying into other asset classes, with a particular focus on fixed income and alternative investments.
Elias Ghanem, the global head of Capgemini Research Institute, attributed the decline in cash holdings to a strategic pivot among HNWIs from wealth preservation to growth. He noted that the cautious approach adopted during uncertain economic periods in previous years has given way to a more optimistic outlook, where investors are actively seeking opportunities to capitalize on market dynamics and economic recovery.
The increase in alternative investments is particularly noteworthy, as it indicates a growing interest among HNWIs in exploring non-traditional avenues to enhance portfolio diversification and potentially achieve higher returns. This category encompasses a wide range of investment vehicles, from commodities and currencies to private equity and hedge funds, appealing to investors looking to mitigate risks and capitalize on niche market opportunities.
Greg Gatesman, head of international client development at UBS, highlighted the strategic importance of fixed-income instruments and tax optimization for HNWIs with substantial assets, emphasizing the use of bond ladders—a strategy involving bonds maturing at staggered intervals—to optimize returns and manage risk effectively.
Looking ahead to 2024, industry experts anticipate a stable yet evolving investment environment. Despite expectations of declining interest rates and controlled inflation, bonds and private credit are expected to remain attractive for wealth preservation purposes. Conversely, private equity investments are poised to gain traction among investors seeking higher growth potential amid market volatility and economic uncertainty.
The report is based on insights gathered from a survey of 3,119 HNWIs across North America, Asia, and Europe, conducted in January 2024. Participants included individuals from wealth management, banking, brokerage, and related sectors, providing a comprehensive perspective on current investment sentiments and strategic shifts within the global high-net-worth community.
In conclusion, the 2024 World Wealth Report underscores the evolving nature of investment strategies among HNWIs, highlighting a shift towards growth-oriented approaches and increased diversification across asset classes. As global economic conditions continue to evolve, strategic allocation and proactive management of investment portfolios will remain critical for maximizing returns and navigating market uncertainties effectively.