<body.content> <block> <p>CHICAGO, Dec. 2 /PRNewswire/ — Even before the recent scandals that have shaken the mutual fund industry, the nation’s wealthiest investors had reducedtheir holdings of mutual funds to a scant 6% of investable assets — down from 11% just two years earlier, according to a new Spectrem Perspectives report, “Asset Allocation and Product Ownership,”released today.</p> <p>In the new report, Spectrem Group examines in detail the investment and financial-product holdings of Ultra High Net Worth (UHNW) households, which are defined asthose having a net worth of at least $5 million. Spectrem Group, a consulting firm based in Chicago, is a leader in understanding the attitudes and behaviors of the wealthy.</p> <p>Thereport finds that these wealthy investors are seeking higher returns in hedge funds, real estate and other alternative investments as they reduce their exposure to traditional mutual funds. Specificfindings of the report include:</p> <p style=”pre-list”> — While nearly two-thirds (65%) of UHNW households own mutual funds,
they have declined to the second smallest weighting in these
investors’ portfolios — falling to 6% from 11% in 2001. (The
smallest holding was stock options and restricted stock, 3%.)
— Average mutual-fund balances have declined by nearly one-third (31%)
over the two-year period to an average of $1.1 million from
$1.6 million.
— Hedge funds are now owned by 15% of UHNW households, up from 6% in
2001.
— Real estate investments are now owned by 74% of UHNW households.
— Managed accounts jumped to 26% of the average UHNW portfolio — the
largest single product holding — from 13% two years earlier.
</p> <p>”The sharp reduction in mutual fund holdings by the nation’s wealthiest investors suggests the industry was falling out of favor even before the scandals that hit late this year. These investors, whom we can assume are some of the most well-informed in the market, have been turning to alternative investments such as hedge funds and real estate in search of higher returns,” said Catherine S. McBreen, managing director of Spectrem Group.</p> <p>”On top of the scandals that are now roiling the industry, this exodus of the Ultra High Net Worth investor raises some troubling questions about the continued status of mutual fund holdings in the portfolios of U.S. investors,” McBreen continued.</p> <p>These findings may be of particular concern since more than two-thirds (67%) of UHNW investors say they intend to invest directly in equities over the next 12 months.</p> <p style=”pre” id=”pre1″> Distribution of Investable Assets – Ultra High Net Worth Households (2003)
Product Category Percentage of Portfolio
Managed Accounts 26%
Individual Stocks 20%
Individual Bonds 10%
Alternative Investments 9%
(Hedge funds, private placements,
private equity, venture capital)
IRAs 9%
Deposits 9%
Other Assets 8%
(Includes: commodities, futures, collectibles,
limited partnerships, charitable gift funds,
structured products)
Mutual Funds 6%
Stock Options/Restricted Stock 3%
</p> <p>The report, compiled from data gathered this summer from more than 300 survey respondents, is the second of five Ultra High Net Worth Perspectives reports being issued by Spectrem Group this year on UNHW investors. The margin of error for the survey data is plus or minus 6%.</p> <p>The UHNW group comprises an estimated 650,000 U.S. households, or about one half of one percent of all households. However, these individuals are estimated to control up to one-third of U.S. investable assets, underscoring their importance to the financial services industry.</p> <p>The Perspectives reports are available for purchase at <a>http://www.spectrem.com/</a> or by contacting Spectrem Group, 641 W. Lake Street, Suite 402, Chicago, IL 60661, (312) 382-8284.</p> <p>About Spectrem Group</p> <p>Spectrem Group is a strategic consulting firm specializing in the affluent and retirement markets. It integrates proprietary research with expertise in building business, marketing and M&A strategies. Spectrem professionals have held senior management positions at leading global companies. Through a collaborative process, they create and implement practical and profitable strategies that fit the cultures of client firms. </p> <datasource>Spectrem Group</datasource> </block> <block class=”contact”> <p>CONTACT: Farrell Kramer, +1-201-768-5337, <virtloc idsrc=”dummy” value=”dummy”>[email protected]</virtloc> , or<br/>Marianne Sullivan, +1-718-834-6026, <virtloc idsrc=”dummy” value=”dummy”>[email protected]</virtloc> , for Spectrem<br/>Group</p> </block> <block class=”website”> <p>Web site: <a>http://www.spectrem.com/</a> </p> </block> </body.content>
