High rollers flock to exotic products

Ultra high net worth individuals are adopting an increasingly sophisticated approach to wealth management, according to findings from the latest global survey from Citigroup Private Bank.

Easy access to financial data and investment information, and the proliferation of alternative investments are having a major impact on the investment portfolios of the super rich.

However, this wealth of information and access to more exotic investment vehicles is not preventing them of making bad investment decisions.

Very few ultra-affluent investors see asset allocation as an important wealth management tool. Instead, many responses show investors chasing performance and failing to properly diversify their portfolios.

Although common patterns can be seen across investors in different regions of the world, the survey found significant regional trends. For instance, North America’s most affluent are more likely to set up a family office than investors in other regions, and they also tend to have numerous relationships and better access to sophisticated products.

In Europe, on the other hand, investors are demanding more tax-efficient products and tax advisory services. European investors are more attracted to real assets and tend to have relatively few relationships with financial institutions.

“The survey, that we carried out in conjunction with McKinsey, confirms what we have seen with clients over the past couple of years,” said Peter Charrington, UK managing director at Citigroup Private Bank.

“There has been significant demand from my clients for tax-efficient products, and they have also been keen to incorporate this area into the structured products that we offer, and which have been much in demand.

“Real estate has been a popular investment over the past few years, and private equity has also become a key part of many clients’ portfolios, especially as part of a co-investment opportunity,” he added.