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World’s richest families invest more in private equity amid volatile markets


© Reuters. FILE PHOTO – This illustration of Seoul, February 7, 2011, shows U.S. $100 notes. REUTERS/Lee Jae-Won

LONDON (Reuters – In 2021, the wealthiest individuals in the world invested more in private equity than they did in fixed income or stocks as they wanted to improve investment returns.

Last year, private equity delivered stellar results as the trillions of dollars invested in pandemic related stimulus drove a record-breaking surge in deal-making. The overall deal value for 2021 was nearly doubled compared to previous years according industry estimates.

Fixed income, however, had a difficult year. Near zero interest rates made it less attractive as an investment option during turmoil in markets while volatile equity markets saw skyrocketing valuations deter investors.

According to the UBS survey of 221 family offices with $493 billion worth assets, investments in private equity have increased steadily between 2019-2021.

As a percentage, direct allocations rose from 10% to 13% in 2020 to 13% in 2021. Indirect allocations, however, were only 8% last year to 7%.

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Fixed income investments fell by 2 percentage points to 11% in 2021, while equity investments remained steady at around 24%. The traditional favorite, real estate investment, dropped to 12% in 2018 from 13% in 2020.

UBS’ wealth management unit manages over $3 trillion of assets. It has famously stated it banks more than half the world’s billionaires.

As it sheds light on billionaire investor’s investing patterns, the report is well-received by the investment community.

About 63% said high-quality fixed Income did not help diversify their portfolio risk. The vast majority of the respondents also preferred active strategies to passive management.

Around 81% of respondents had almost 3% invested in cryptocurrencies to increase their investment returns and learn more about it.