Wealthy investors are sharpening their focus on real estate, and remain fixated on private equity, according to a survey of nearly 450 high net worth individuals.

Members of the HNWI network TIGER 21 took more comfort in real estate in this year's second quarter, while their allocations to private equity remained flat but still at an all-time high, according to the organization's latest Asset Allocation Report. 

Private equity and real estate investments now comprise almost half of members’ portfolios, the report shows. It measures the aggregate asset allocation exposures of TIGER 21 members, of which there are around 440, based on their “portfolio defense” presentations.

In the past three months, allocations to real estate investments inched up 1 percentage point to 26 per cent, while private equity remained flat at 23 per cent, but nonetheless represented its highest allocation level since 2007, TIGER 21 said. Cash allocations also rose during the second quarter to 11 per cent, the highest level since Q3 2014. 

The sustained low interest environment has made it increasingly difficult for TIGER 21 members – many of whom have accumulated significant wealth from building and selling businesses – to generate income from capital, leading to a continued emphasis on traditionally “riskier” investments, the organization said. It has also noted previously that it is unsurprising that members would rely on what they are most familiar with – private equity and real estate - during such times. 

“In the current economic climate, our members are seeing the benefits of taking calculated risks in order to generate returns,” said Michael Sonnenfeldt, founder and chairman of TIGER 21. “Our members have responded to the fallout from the global financial crisis, characterized by a pervasive lower-interest rate environment, by reducing their fixed income investments from 23 per cent to 10 per cent and are instead focusing on private equity and real estate allocations.”

At 21 per cent, public equity remains a core part of members’ allocation, TIGER 21 said. The three main components of public and private equity, plus real estate, add up to 70 per cent - “just about the highest combined allocation of these three investment vehicles ever recorded,” the organization added.

“In a low- to negative- real interest rate environment, if you are trying to stand still, you are almost surely going backwards, and with the ability to generate meaningful income from bonds and other fixed income instruments almost completely gone, Members are having to take on more risk to get their portfolios to perform, even at modest levels,” said Sonnenfeldt. 

TIGER 21, which stands for The Investment Group for Enhanced Results in the 21st Century, has groups across North America and is launching in London later this year.