The Assets You Never Bought (But Really Should)

Have you ever wondered how the super wealthy invest their money? 

They must do things differently than the Average Joe, right? 

That’s correct.

A recent study performed by JP Morgan Asset Management caught my eye this week. It clearly shows that the super-rich behave differently than most investors.

So, what sets them apart?

There’s one particular asset class that they take advantage of that most investors ignore.

They use this asset class to not only protect their wealth, but to grow it (regardless of what the broader market is doing).

If that sounds too good to be true, it’s not.

The reason that the uber-wealthy take advantage of this strategy is because it’s largely uncorrelated to the traditional stock and bond markets.

And the good news is, anyone can pursue this strategy.

It doesn’t require billions of dollars to do so. You don’t even need millions.

I’m talking about alternative assets. 

In the past this might have been difficult for the average investor. But today, it’s easy. And I can prove it.

An alternative investment is a financial asset that does not fall into the traditional categories of stocks, bonds, or cash. 

Common examples are real estate, private equity investments, venture capital, managed futures, other forms of derivatives (options contracts), commodities and precious metals, art, antiques, and other collectibles.

To be clear here, I’m not talking about a Paul Skenes rookie card… I’m talking about a high-grade 1952 Topps Mickey Mantle.

I’m talking about assets that are truly rare and so feverishly sought after that their value is not tied to the stock market’s performance.

JP Morgan Asset Management recently published their 2024 Global Family Office Report. This study surveyed 190 single family office clients from across the world with an average family net worth of $1.4 billion.

And after reading over 97 pages of dry copy and charts, one thing was clear: These families get rich, and stay rich, because of alternative investments.

Owning assets like that is how these family offices are able to hit their double-digit annual return targets without taking excessive risks in the stock market.

According to the Family Office Report, alternative investments was the largest average holding of these portfolios with a 47.5% weighting (publicly traded stocks was the second largest at 26.3% average weighting).

What’s more, the data shows that alternative assets become a more and more important part of these portfolios the larger they get. 

In 2021 Vanguard published a study which looked at over 5 million investor accounts showing that the average portfolio allocation across its platform was 63% stocks, 16% bonds, and 21% cash. 

When compared to the JP Morgan report, this Vanguard data shows that there’s a big disconnect between the typical retail investor and the super-rich.

But it doesn’t have to be that way. 

Maybe you’ll never own a Monet or a Mickey Mantle rookie card. But investing in alternative assets – and reaping the benefits – is easier than you might think.

At Wide Moat Research, we’re all about building portfolios that allow investors to sleep well at night and Blackstone is just one of several ideas that we like when it comes to adding diversification to our portfolios without adding undue stress or risk.

Regards,

Nick WardAnalyst, Wide Moat Research