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.
(Reporting by Saikat Chatterjee, additional reporting by Brenna
Hughes Neghaiwi; Editing by Emelia Sithole-Matarise)
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