Editor’s note: This article was first published in January 2013. It is an outlook for 2013 based on a PNC Wealth and Values Survey from late 2012; the percentages, sector preferences and views on Europe and emerging markets refer to that moment, as do the cited fund and Bank of America returns.
Throughout this crisis, the rich have kept getting richer and increasing their “investable assets”. Maybe they’re smarter or better advised than the rest of us. Either way, we should at least know where they’re going to invest, since statistically their investments will turn out to be right and profitable. According to PNC’s survey on wealth and values (PNC Wealth and Values Surveys), the wealth of the rich has grown by an average of 20% over the last 5 years (since the crisis began).
Only 16% of this select club have seen their wealth shrink. This year, millionaires are twice as optimistic about the US economy as they were last year, and very optimistic about investing in stocks and real estate. According to the survey, 88% of them say that now, more than ever, they are living well below their means. When asked where they will place their bets over the next 12 months of 2013, these were their answers.
More than 50% will bet on the technology sector, because they believe it still has a long way to go. And they don’t only mean tech companies like Google, Microsoft, Apple or Facebook; they also see biotechnology companies as strong bets because of their growth potential in a changing world.
They are betting heavily on energy and utilities companies, as well as healthcare-related companies.
Surprisingly, the least popular sectors among the rich are green investing (alternative energy, socially responsible companies…), retail, and manufacturing and transport; above all, they are steering clear of airlines. This suggests renewables will be the future some day, but apparently the time hasn’t come yet, at least in the opinion of these people.
Their view on Europe
The rich still don’t trust investing in Europe. They know our stock markets are very cheap, but they still think we have many problems to solve. Some think we are winning a few battles over the euro, but the war is very hard and they don’t believe we will win it with austerity measures alone, which they see as a policy that creates poverty. 60% of these wealthy investors prefer emerging markets to Europe, although they may change their minds as 2013 unfolds.
They like the East
These wealthy investors are placing their trust, and part of their diversification, in funds that invest in the stock markets of growing economies, such as those of the Middle East.
The United Arab Emirates and Saudi Arabia stock markets make up a small part of their portfolios within the funds they choose. Above all, they like banks based in countries such as Qatar or Kuwait. Another part of their diversification is in banks such as National Bank of Kuwait, Türkiye İş Bankası or Qatar National Bank.
If we look at the figures for certain investment funds, in particular the JPMorgan Funds Emerging Middle East, this fund specializing in these stocks has returned more than 55% since 2008.
Finally, they are betting on infrastructure and telecom companies with a strong presence in many of these emerging countries, both in the East and in Latin America, because of the growth opportunities they represent.
Still, the vast majority trust American companies and American banks in general, and Bank of America in particular, which has already risen more than 116% so far this year. As we can see, that was a great investment by Warren Buffett.
Further reading
Featured image: Divya Thakur, CC BY-SA 2.0, via Flickr.
