Private equity posted stellar returns last year as trillions of dollars in pandemic-related stimulus prompted a record surge in deal-making with overall deal value in 2021 doubling from previous years, according to industry estimates.
In contrast, fixed income faced a torrid year as near zero interest rates sapped its attractiveness as a safe haven during market turmoil while sky-high valuations in volatile equity markets deterred investors.
Investments into private equity by the world’s wealthiest families, increased consistently between 2019 and 2021, according to a survey for the UBS report of 221 family offices overseeing $493 billion in assets.
Direct allocations as a percentage of their total investments rose to 13% in 2021 from 10% the previous year while indirect allocations were 8% last year versus 7%.
Meanwhile, fixed income investments declined by two percentage points in 2021 to 11% from the previous year while equity investments were steady around 24%. Even real estate investments, a traditional favourite, slipped to 12% last year from 13% in 2020.
UBS’ wealth management arm manages more than $3 trillion in assets. It has famously stated it banks more than half the world’s billionaires.
The report is widely watched by the investment community as it shines a light into the investing habits of these billionaire investors.
About 63% of the family offices surveyed said they no longer felt high-quality fixed income helped diversify their overall portfolio risk. A majority also were relying on active manager strategies rather than taking the passive route.
About 81% of the family offices surveyed had invested nearly 3% into cryptocurrencies, primarily to learn about the technology and generate better investment returns.
Source: Economy - investing.com
