Wealthy Americans Showing Renewed Faith In Mutual Funds

by Phillip Morton, Investors Offshore.com

01 August 2005

New research suggests that, despite the surging popularity of alternative investments, wealthy Americans are continuing to put their faith, and money, into mutual funds.

Over the past 2 years, investors worth $5 million or more have doubled the percentage of investable assets allocated to mutual funds from 6% in 2003 to 12% in 2005, according to a new study released by financial services consultancy firm, Spectrem Group.

Over the same period, cash deposits have increased to 13% of investable assets, from 9% in 2003, and investments in individual stocks and bonds have declined to 18% and 8%, respectively, from 20% and 10% in 2003, the Spectrum study revealed.

“A fascinating phenomenon has emerged among the nation’s wealthiest investors," observed George H. Walper, Jr., President of Spectrem Group.

He continued that:

"As financial services firms have worked to provide exciting alternative investments for their wealthiest clients, these investors have chosen to put their money into a far more time-tested vehicle: mutual funds.

"This, of course, points to restored confidence in mutual fund companies following the scandals of the recent past. But coupled with the move out of individual stocks and bonds and into cash, this also suggests that Ultra High Net Worth investors are still somewhat gun-shy about accepting greater risk and are managing their market exposure in a conservative way."

Spectrum's research appears to validate this finding, showing that in 2005, ultra high-net-worth investors allocated 8% of their investable assets to riskier alternatives, such as hedge funds, venture capital and private equity, down from 9% in 2003.

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