Investment Strategies

HNW Peer-To-Peer Investor Network Shows Members Smile On Property, Frown On Hedge Funds

Tom Burroughes Group Editor July 20, 2017

HNW Peer-To-Peer Investor Network Shows Members Smile On Property, Frown On Hedge Funds

The Anglo-American network of high net worth individuals, known as TIGER 21, issues its latest report on where members are putting their money to work.

Real estate investments reached a peak in the second quarter and hedge funds sagged to a new low in terms of asset allocation by members of the TIGER 21 peer-to-peer network for high net worth individuals.

The organisation in its Second Quarter 2017 Asset Allocation Report showed that real estate investments made up a third (33 per cent) of members’ assets, an all-time high that represents a 7 per cent year-over-year increase. On the flipside, exposure to hedge funds, steadily falling, is now at 4 per cent and the lowest level since TIGER 21 began collecting this data in 2007. At the peak of the Great Recession, hedge funds experienced a low of 5 per cent.

TIGER 21’s membership base comprises more than 500 of North America-and London-based entrepreneurs and investors, who collectively manage approximately $51 billion in personal investible assets.

“Given the strong correlation between monetary easing and poor hedge fund performance, it comes as little surprise that our Members are seeking returns elsewhere. It’s worth bearing in mind that, though there are some standout hedge funds delivering noteworthy gains, they currently represent the exception rather than the rule. We do, however, believe that the industry has the potential to rebound in the event of a future rate hike,” Michael Sonnenfeldt, founder and chairman of the organisation, said.

At meetings of TIGER 21 members, many of them, when discussing hedge funds, have cited concerns regarding fees, lock-up periods, and disappointing returns in this low-interest-rate environment.

Public markets
Among listed equities, allocations also declined slightly in the second quarter of this year, now at 20 per cent. While still a sizeable percentage of their overall assets, this is the lowest reading seen since Q2 2010, when they dipped to 19 per cent.

This slight decline of public equity this quarter coincided with a small uptick in private equity investments, which now represent 21 per cent of combined holdings.

“While our members clearly still embrace public equities as part of a diversified portfolio, it is no coincidence that private equity currently has the edge. As long-term, strategic investors with deep expertise in various industries, private equity offers them the opportunity to take an active role while weathering the short-term volatility associated with public equities,” Sonnenfeldt said.

 Turning to real estate, he said: “Many of our members created their wealth in the real estate industry, and subsequently continue to maintain significant holdings. They have demonstrable experience and expertise in managing diverse real estate property portfolios, enabling them to tolerate the associated risk.”

He added: “Various other factors - including historically low interest rates, public equity markets priced to perfection, and the anticipation that regulatory rollback is imminent - have significantly enhanced appetite for real estate investments."

The asset allocation report measures the aggregate asset allocations (on a trailing twelve-month basis) of members.  Each individual member generally reports on their portfolio annually, so that in any given month of the year approximately 1/12th of its membership reports.

Founded in 1999, TIGER 21 is headquartered in New York City and has groups in Atlanta, Austin, Boston, Charlotte, Chicago, Dallas, Denver, Houston, Los Angeles, Miami, Nashville, New York, Newport Beach, Palm Beach, San Diego, San Francisco, San Juan, PR, Seattle, Tampa, and Washington, DC as well as international groups in Calgary, Edmonton, London (UK), Montreal, Ottawa, Toronto, and Vancouver. 

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