Wealthy investors may be missing out on global opportunities

Survey reveals they can be too focused on their own regions when opportunity may be elsewhere

Wealthy investors may be missing out on global opportunities
Steve Randall

High-net-worth individuals are generally optimistic and keen to find opportunities to invest but they may be restricting themselves to domestic markets.

A global survey of more than 3,600 wealthy investors (U$1m+ investible assets) and entrepreneurs (turnover of $250K+) by UBS, reveals that most hold a large share of their assets in cash but many want to invest it.

Positivity about the global economy is growing among investors with 51% optimistic vs. 21% who are pessimistic; while business owners are even more optimistic (62% vs. 15% pessimistic).

When asked about their own regions, 60% of investors and 68% of business owners are optimistic.

But Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, says that investors should think bigger.

“'Buy local' works well for vegetables, but we are more optimistic on the global economy and this survey confirms investors sometimes focus too much on their home region. Diversification is still the best way to access opportunities and side-step domestic risks," he said.

Investors have high levels of cash holdings with 32% of portfolios globally allocated to cash.

This ties in with concerns about domestic issues with 44% citing their country’s politics as a top concern and 40% worried about national debt.

"Cash is a safe asset for a liquidity strategy but a risky one for longevity,” said Paula Polito, Client Strategy Officer at UBS Global Wealth Management. “Right now, we see high levels of cash globally. This is a good time for investors to consider a more diversified portfolio."

Bullish on stocks
The domestic focus of investors was also shown in investors’ views of stocks.

While 56% were bullish on their own region’s markets, this slips to 49% for global stocks.

But they are not dissuaded by market volatility. Although 67% said the Q4 2018 volatility concerned them, 74% said it presented an investment opportunity.

Among business owners, 74% were optimistic on their business; 37% planned to invest more versus 10% who planned to invest less; and 31% intended to hire more over the next 12 months versus 12% who intended to downsize.

Forty-two percent of investors planned to invest more in the next six months versus 17% who planned to invest less with sustainable investing cited as a growing interest, making up 27% of portfolios versus 22% five years ago.

"We have seen significant investor interest in multi-asset mandates and other diversified solutions as markets recover,” said Christian Wiesendanger, Head of Investment Platforms and Solutions at UBS Global Wealth Management. “Most recently, our 100% sustainable cross-asset portfolio surpassed USD 5 billion in assets globally. Investors should continue to look past their favored asset classes and countries for opportunities as the global business cycle advances."