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- Knight Frank's 2023 "Wealth Report" details how ultra-high net worth individuals invest their money.
- Stocks and shares are the biggest individual contributors, with 26% of the average UHNWI's portfolio held in equities.
- About 5% of their portfolios goes to "investments of passion" like art, cars, and wine.
Have you ever wondered how the world's wealthiest people invest their millions?
On March 1, Knight Frank published 2023's "Wealth Report," which details the finances of ultra-high net worth individuals or UHNWIs.
Knight Frank surveyed over 500 private bankers, wealth advisors, and family offices representing a combined wealth of more than $2.5 trillion.
And while its report estimates the world's richest people lost over $10 trillion in total, it also shares insights into how the elite's financial portfolios are composed.
From vast art collections to crypto and NFTs, this is how the world's richest people store their money. Each asset category makes up a percentage of the average portfolio, with the total adding up to just over 100% thanks to rounding in Knight Frank's report.
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26% of the world's richest people's investment portfolios goes into equities, or stocks and shares in companies, Knight Frank's survey showed. In the Americas, that proportion reaches as high as one-third.
In 2022, Warren Buffett's Berkshire Hathaway spent a record $68 billion on stocks as value in the market reemerged, the company said in its latest annual report.
L. Toshio Kishiyama
Altogether, commercial property makes up more of the portfolios of the super rich than equities, but Knight Frank's report splits that into direct and indirect investments.
The average portfolio sees 21% put directly into commercial property, while a further 13% is invested through debt funding or real estate investment trusts (REITs).
43% of respondents say their clients currently invest in offices — the most common type of commercial property — while healthcare was the most popular sector with 35% representation.
Environmental factors are significant in how the wealthy choose which properties to invest in as well, with 57% saying their clients look at whether the property has a green energy source.
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Bonds have long been touted as a convenient way to invest money, so it's no surprise that they make up 17% of the average UHNWI's portfolio.
A bond is effectively a type of IOU, typically issued by governments or corporations, where the issuer is obliged to pay the holder back their investment plus interest at a set maturity date, usually anywhere from one year to 30 years, with yields generally falling the further in the future a bond's maturity is.
BlackRock, the world's largest asset manager, recently said investors should pile into bonds as federal interest rates continue to rise.
Associated Press
Private equity means investing in a company which isn't on the stock market yet, and if it's venture capital, that means it's riskier but the company has high growth potential.
And for the world's richest people, they'll average 9% of their portfolio into such investments.
On ABC's "Shark Tank," entrepreneurs are vying for private equity investment, but VC can also involve helping to found startups.
Peter Thiel was Facebook's first angel investor in 2004, turning his initial $500,000 into $638 million when the company went public eight years later.
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Investments of passion are things like art, cars, and wine — which might be bought for enjoyment or simply as an investment. They make up approximately 5% of the average portfolio.
59% of Knight Frank's survey respondents said that their clients were likely to purchase art this year. Watches and wine were the next most popular, while about a third expected clients to buy classic cars. 20% are in the market for luxury handbags, the survey showed.
In 2017, Leonardo da Vinci's "Salvator Mundi" became the most expensive painting ever sold at $450.3 million.
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On average, the world's richest people store 3% of their investments in gold. In fact, they consider it the second-safest purchase behind property.
Financial analyst James Jason, of commodities trading platform Mitrade, previously told Insider: "History has shown that during economic slowdowns, from the Great Depression to the COVID-19 pandemic, gold appreciates in value."
After Russia invaded Ukraine last February, the country's demand for gold bars and coins rose nearly fivefold in 2022 from the previous year, according to the World Gold Council.
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The world's wealthiest people consider crypto to be the most volatile investment, but it still makes up 2% of the average portfolio.
In last year's report, Knight Frank said 18% of UHNWIs owned some kind of cryptocurrency.
And while 34% still believe the NFT market has a lot of potential, 20% changed their minds after the crypto crash.
Following the dramatic implosion of crypto exchange FTX last November, regulators around the world have started talking about how to better protect investors.
Getty Images; Insider
Knight Frank's survey also lists "other" investments, which take up 7% of the average portfolio, but does not specify what this category includes.