Richest Making Alternatives Their Core Investments

Aug 18 2008 | 6:58am ET

Alternative investments are fast becoming anything but for the world’s wealthiest investors.

The richest clients of JPMorgan Private Bank are slashing their equity allocations and upping the share of their assets invested in alternatives, sometimes putting more than half their money into hedge funds, private equity funds and real estate, according to Nick White, international head of alternatives at the private bank. And he predicts that most clients will have larger alternatives allocations than equity allocations within five years.

“Alternatives, rather than equities, are already the core for some,” White told Financial News. “In terms of it being the majority of clients who hold alternatives as their core holding, we are not there yet, but at this rate we will be there within the next five years.”

Already, White says, alternatives allocations have risen from between 5% and 15% to between 18% and 55%, while equity allocations have dropped from between 40% and 80% to between 18% and 55%.

JPMorgan Private Bank advises a whopping 40% of the Forbes magazine list of global billionaires.

JPMorgan is not the only private bank pushing alternatives on its clients. Citi Private Bank is doing the same, according to Jennifer Tay, head of portfolio counseling for Asia-Pacific. She told Asian Investor, “We are actually looking at less correlated returns and absolute returns that are generally found in alternative investments.”

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