The world of the uber wealthy is a realm that very few will ever experience. Their investing strategies are vastly different from the average investor, with a focus on preserving their legacy and wealth for future generations. The population of centimillionaires, individuals with a net worth of over $100 million, is relatively small, with around 28,420 individuals globally. These ultra-wealthy individuals tend to congregate in key cities such as New York City, the Bay Area, Los Angeles, London, and Beijing, where financial infrastructure and real estate markets are robust.
Investment Preferences
Unlike the average investor who may dabble in publicly traded equities or cryptocurrencies, centimillionaires are more selective in their investments. They prefer to steer clear of get-rich-quick schemes and instead opt for stable assets such as high-grade real estate properties. “Trophy asset” Class A properties, which are typically newer constructions, are popular choices among the ultra-wealthy. Real estate investments often make up a significant portion of their portfolios, with an average of 27% allocated to such assets.
Managing the vast wealth of centimillionaires is no small task, which is why many of them rely on single family offices to handle their financial affairs. These offices oversee everything from inheritance to household expenses, allowing the ultra-wealthy to focus on growing their wealth. In addition to financial management, family offices may also have foundation arms for charitable giving and venture capital arms for investing in high-growth startups. The number of family offices worldwide has been on the rise, reaching over 4,500 in 2020 with an estimated $6 trillion in assets under management.
Alternative Investments
In addition to real estate, centimillionaires also show interest in alternative investments such as private credit and fixed income. Private credit, in particular, is gaining traction among investors seeking sources of yield outside of traditional markets. This trend reflects a growing appetite for non-traditional assets with unique risk-return profiles. Alternative investments encompass a range of options including venture capital, private equity, and real assets, providing diversification opportunities for the ultra-wealthy.
For some ultra-wealthy individuals, owning a stake in a professional sports team is not just about financial returns but also about status and exclusivity. Buying into a sports team is seen as a way to mingle with peers of similar stature and solidify one’s position in the elite circles. The exclusivity of owning a sports team can be compared to being knighted, as it elevates one’s status in the eyes of society. This desire for prestige and recognition is a driving force behind investments in professional sports teams.
The investing strategies of centimillionaires reflect a desire to preserve and grow their wealth while also seeking opportunities for status and exclusivity. Through a combination of real estate, alternative investments, and stakes in professional sports teams, the ultra-wealthy aim to maintain their financial empires for generations to come. As the landscape of investing continues to evolve, so too will the strategies of the ultra-wealthy, as they navigate the complexities of wealth management in an ever-changing world.