Rich People: Where They Invest

There are several ways to find out what the rich are investing in. One way is to look at what is known as insider trading activity, which tracks when major companies or investors are buying and selling stocks. Websites such as Capitol Trades, Quiver Quantitative, Unusual Whales, Barchart, Openinsider and more offer this information. Additionally, one can look at what the ultra-wealthy are investing in by looking at their portfolios. For example, Knight Frank's 2023 Wealth Report found that stocks and shares were the biggest individual contributors to the portfolios of the ultra-high net worth individuals (UHNWIs), with 26% of their average portfolio held in equities. Other investments included commercial property (34%), bonds (17%), private equity/venture capital (9%), and investments of passion (5%) such as art, cars, and wine.

Commercial property

The most common type of commercial property that the super-rich invest in is offices, with 43% of respondents in a Knight Frank survey indicating their clients currently invest in this area. Healthcare properties are also popular, with a 35% representation. Environmental factors play a significant role in the decision-making process, with 57% of clients considering green energy sources when choosing properties to invest in.

In 2022, the ultra-rich invested $455 billion in commercial properties, according to Knight Frank's wealth report. This figure is down from a record high of $493 billion in 2021 but still marked the second-strongest year on record. Private capital investments surpassed those from institutions, with $455 billion and $440 billion injected into commercial properties, respectively.

The ultra-wealthy, or ultra-high-net-worth individuals (UHNWIs), generally have net worths of at least $30 million. Their investment portfolios often include a mix of stocks, bonds, private equity, and tangible assets such as real estate, art, cars, and gold.

Equities

UHNWIs are defined as those with net worths of at least $30 million. Their wealth comes from shares in private and public companies, real estate, and personal investments, such as art, cars, and planes.

In 2022, Warren Buffett's Berkshire Hathaway spent a record $68 billion on stocks as value in the market reemerged, according to the company's latest annual report.

An equity investment is money that is invested in a company by purchasing shares in that company on the stock market. These shares are typically traded on a stock exchange. Equity investors purchase shares with the expectation that they will rise in value or generate capital dividends.

Some of the top stock picks from the billionaire class include:

• Broadcom: Steve Cohen of Point72 Asset Management, with $172.1 billion in assets under management (AUM), recently initiated a position in Broadcom, a semiconductor and infrastructure software provider. Shares in the company were up by a quarter for the year to date through early June, helped by excitement over artificial intelligence (AI).
• Oracle: David Tepper of Appaloosa Management, with a net worth of $6.1 billion, upped his stake in Oracle by nearly three-quarters in Q1. Oracle stock gained more than 12% in March alone, outperforming the broader market.
• Alphabet: Daniel Sundheim's D1 Capital Partners, with $26.1 billion in AUM, increased its stake in Google's parent company, Alphabet, by more than a fifth in Q1. Alphabet stock beat the broader market by about 14 percentage points between the end of March and early June.
• Microsoft: Stephen Mandel of Lone Pine Capital, with $17.3 billion in AUM, has held Microsoft stock since 2013 and continued to add to his position in Q1.
• Amazon: Philippe Laffont of Coatue Management, with a net worth of $6.1 billion, upped his stake in Amazon by 2.5% in Q1. Coatue has owned Amazon stock since the end of 2009.

Crypto

The cryptocurrency market has undeniably created a new wave of millionaires and billionaires. However, it is important to note that high-net-worth individuals (HNWIs) are not investing in the cryptocurrency market to the same degree as other demographics. According to the Capgemini World Wealth Report 2018, only about a third of the more than 2,600 millionaires included in the study have received information about investing in cryptocurrencies from their wealth managers. This hesitation may be due to the long-term health of the digital currency space or the lack of understanding of cryptocurrencies and their potential by wealth managers.

Despite this, the cryptocurrency market has created some influential figures in the industry. Changpeng Zhao (CZ), for example, is a Chinese-Canadian entrepreneur and the founder and CEO of Binance, the world's largest cryptocurrency exchange in terms of trading volume. Forbes estimates CZ's wealth at $10.2 billion, with some analysts believing he is much wealthier. Brian Armstrong, the co-founder and CEO of Coinbase, the largest US-based cryptocurrency exchange, is estimated to be worth $3.8 billion.

The world's wealthiest people consider crypto to be the most volatile investment, but it still makes up 2% of the average portfolio, according to Knight Frank's 2023 "Wealth Report". In last year's report, Knight Frank stated that 18% of ultra-high-net-worth individuals (UHNWIs) owned some form of cryptocurrency.

Some ways to identify new cryptocurrencies for investment include:

• Cryptocurrency Exchanges: Binance, Coinbase, Crypto.com, Gemini, and Kraken are some of the most reliable sources for finding new investments.
• Data Aggregators: CoinMarketCap and CoinGecko are examples of cryptocurrency data aggregators that help you find new crypto by providing information such as prices, market capacity, and trading volume.
• Social Media: Twitter, Discord, and Telegram are platforms where you can easily find cryptocurrency developers and founders sharing information about their coins.
• Tools: KryptView and BSCCheck are tools that help you decide which coins are better than others by displaying information about transactions, contracts, holders, prices, and more.

Private equity

The private equity industry has grown rapidly and tends to be most popular when stock prices are high and interest rates are low. In 2022, private equity buyouts totalled $654 billion, the second-best performance in history.

Some of the largest private equity firms include The Blackstone Group, Kohlberg Kravis Roberts, Carlyle Group Inc., and Apollo Global Management Inc.

Passion investments

• Fine wines: In a Knight Frank Luxury Investment Index (KFLI) study, wine was ranked as the fifth most widespread form of passion investment globally and the top passion investment in Asia. Wine has been shown to provide good returns, with rare whisky prices growing more than fivefold and fine wine indexes reporting almost a 10% increase in 2016.
• Art: Art is a common passion investment, with 59% of respondents in Knight Frank's survey saying their clients were likely to purchase art in 2023. Art can be seen as an asset of beauty and a way to diversify one's portfolio. However, there is no guarantee that the value of a particular piece or artist will appreciate over time.
• Classic cars: Classic cars are another example of a passion investment that can provide good returns. In the Coutts Bank 2017 Passion Index report, classic cars saw a 10.4% decrease in value in the previous year, but they have increased fourfold since the index's inception in 2005.
• Luxury handbags: Luxury handbags are another form of passion investment that can provide good returns. In the KFLI study, handbags were the third most widespread form of passion investment in Asia.
• Stamps: Stamps are a type of collectible that can be considered a passion investment.
• Watches: Watches are a popular form of passion investment, especially in Asia, where they were ranked as the most widespread form of passion investment in the KFLI study.
• Jewellery: Jewellery is another example of a precious item that can be considered a passion investment.
• Trophy properties: Properties, such as second overseas homes, can also be considered passion investments. These types of properties can provide capital appreciation and income through rent.

It is important to note that passion investments may not always yield positive returns, and their financial performance can be unpredictable. As such, it is prudent to build a diversified portfolio of passion investments over time and to undertake detailed due diligence before investing.

Frequently asked questions