The super-rich have a very different mindset toward investing than the average person, wealth manager Robert Fraser says. “Most people focus exclusively on public markets and have a 60/40 mindset towards investing â where 60% of their funds are in equities and 40% is in fixed income. Billionaires don’t think that way,” the co-founder and CFO of the U.S.-headquartered Aspen Funds, told CNBC Pro on July 3. Fraser, whose firm serves ultra-high-net-worth and high-net-worth individuals around the world, manages over $500 million through his Aspen Funds. He says the wealthy are constantly thinking about how to put their money to work. “Billionaires have a balance sheet mindset. They’re looking to grow their net worth by multiplying their assets and reducing their liabilities. They’re very focused on their net worth. The average investor has an income statement mentality focusing on earnings and seeing their to investments as a safety net.” The global billionaire population is on the rise, with 2,781 making the cut this year â 141 more than in 2023, according to Forbes , which noted that they’re also richer than ever, worth an aggregate of $14.2 trillion â $2 trillion more than in 2023. Portfolio allocation The strategy of the ultra-rich differs based on an individual’s investable funds, Fraser said, revealing how individuals with around $1 million and $10 million and $100 million to invest typically allocate their funds: What’s consistent, however, is that a larger proportion of investments is in alternatives. That’s because they have “lower volatility than public markets, higher returns, liquidity discounts, better tax incentives and are uncorrelated to stock markets,” Fraser explained. Alternative investments are assets that do not fall into the conventional categories of stocks, bonds, commodities and cash. They include real estate, private equity, venture capital, private debt, hedge funds, futures, cryptocurrencies â and even collectors’ items like art, jewelry and watches. The returns are attractive too, Fraser added, referencing the performance of the Yale Endowment Fund , which invests around half of its funds in alternatives. It yielded “13.1% returns at a time in 2023 when the standard 60/40 portfolio returned 8.8%,” he said. Fraser named real estate as another asset class the ultra-rich like, with many owning properties and earning rental income. Gains, he said, are also generated when properties are sold and the the profits are reinvested into other properties. “Billionaires love real estate â it brings benefits to owners like growth through inflation, depreciation, tax-deferral and long-term capital gains,” Fraser added. ‘Turn your money from soldiers to an army’ When asked how the average investor can incorporate some of these strategies when building their portfolios, the wealth manager replied: Determine your liquidity premium for the next year and put that amount into equities and fixed income. He suggests that the remaining funds be channeled into real estate â starting with single family residences and eventually diversifying into industrial properties, multi-family residences and retail real estate. He added that investors can consider pooling funds with friends or family if they face difficulties buying a property on their own. “It is good for the average investors regardless of whether they are accredited to be in real estate. As their wealth increases, they can invest in private equity and maybe even venture capital or hedge funds like the ultra-wealthy,” Fraser said. “The most important thing to do in this process, is to figure out how to turn your money from soldiers to an army that can work for you,” he added.
Source Agencies
