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How Ultra High Net Worth Asset Allocation Works For Investors

What can you learn from ultra high net worth asset allocation and investment strategies?


Asset allocation is a term used to describe the percentage of each asset class that is held in a portfolio. The asset allocation of a portfolio is one of the most important decisions an investor makes. It should be based on the investor’s goals, risk tolerance, and time horizon.

For example, a portfolio with a 60/40 asset allocation has 60% of its assets in stocks and 40% in bonds. 

There are two main types of asset allocation: strategic and tactical. 

  • Strategic asset allocation is a long-term approach that seeks to provide the best possible return for a given level of risk. 
  • Tactical asset allocation is a short-term approach that seeks to take advantage of market opportunities. ultra high net worth asset allocation refers to the asset allocation of a portfolio with a very high value.

Asset Allocation By Net Worth

Asset allocation by net worth is a common way to determine how to invest one’s assets. The idea is to match the risk level of the investments to the individual’s net worth. 

  • For example, someone with a high net worth may be able to afford to take on more risk, and therefore may allocate a greater portion of their assets to stocks.
  • Someone with a lower net worth may need to allocate a greater portion of their assets to cash and bonds in order to preserve capital.

There is no perfect asset allocation strategy, and what works for one person may not work for another. It is important to consider one’s goals, time horizon, and risk tolerance when making investment decisions. Use this risk tolerance questionnaire.

rich high net worth holding money

How High a Net Worth is Ultra-High Net Worth?

  • The average investor has less than $100,000, most of which is in their workplace retirement plans. 
  • HNW High net worth investors frequently have at least $1 million in liquid financial assets. 
  • Clients with very high net worth have liquid assets worth at least $5 million. 
  • If you have at least $30 million accessible for investment, you are considered to have an ultra-high net worth, or UHNW

Asset Allocation for Extremely Wealthy People in 2023

Ultra-high net worth investors, whose portfolios start at $30 million, require a more complex and unique financial strategy to manage their assets. The majority choose to take reasonable risks with some of their portfolio while still growing their money safely.

In comparison to other categories of investors, ultra-high net worth investors have very different asset allocations, finds a study by Kohlberg Kravis Roberts (KKR) based on data from private wealth managers.

Finance and rich high net worth money concept
high net worth asset allocation

High Net Worth & Ultra High Net Worth Asset Allocation

As an investor’s net worth increases, so does the complexity of their financial life. Along with this increase in complexity, there is a corresponding increase in the importance of asset allocation. For ultra high net worth individuals, asset allocation is a critical tool for preserving and growing wealth.

There are a number of factors to consider when developing an asset allocation strategy for ultra high net worth individuals. 

  • The first is the level of risk tolerance. An investor’s risk tolerance will have a major impact on the types of assets they are willing to hold. For example, an investor with a low risk tolerance may be unwilling to invest in volatile assets such as stocks.
  • Another important factor to consider is the time horizon. An investor with a long time horizon can afford to take on more risk, since they have a longer time frame to recover from any short-term losses. Conversely, an investor with a shorter time horizon will need to be more conservative in their asset allocation in order to protect their capital.
  • Finally, it is also important to consider the investor’s goals. An investor who is saving for retirement will have different asset allocation needs than an investor who is trying to generate income. Each investor will need to tailor their asset allocation to their specific goals.
*Feel free and share this image, just attribute with a link Ex. Source: High Net Worth Asset Allocation ( www.michaelryanmoney.com)

source: KRR

High Net Worth Asset Allocation Models 

As an investor’s wealth increases, so does the complexity of their financial life. Along with this complexity, there is an increased need for professional advice to ensure that their wealth is managed in a way that is consistent with their goals and objectives. This is where high net worth asset allocation models come in.

Asset allocation models are designed to help investors determine how to best allocate their assets across different asset classes. These models take into account factors such as an investor’s risk tolerance, time horizon, and investment objectives.

There are a number of different high net worth asset allocation models available, each with its own strengths and weaknesses. As such, it is important for investors to work with a financial advisor to select the model that is right for them.

Some of the most popular high net worth asset allocation models include:

1. The Capital Asset Pricing Model (CAPM)

Does the Capital Asset Pricing Model Work?

2. The Three-Factor Model

Fama-French Three-Factor Model 

3. The Arbitrage Pricing Theory (APT)

Arbitrage Pricing Theory – Understanding How APT Works

4. The Multi-Factor Model

Using Multifactor Models – CFA Institute

5. The Black-Litterman Model: 


Related Reading

Different Types of Asset Allocation Models

Each of these models has its own unique approach to asset allocation. For example, the CAPM focuses on the relationship between risk and return, while the Three-Factor Model takes into account the impact of size, value, and momentum on investment returns.

HNWI High Net Worth Portfolio Allocation Trend Analysis

A high net worth individual’s (HNWI) portfolio allocation is the composition of their investment portfolio in terms of different asset classes. 


Asset Allocation % of Total for High Net Worth, Ultra High Net Worth investors and Pensions

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Source: KKR 

  • Greater adoption of indirect ownership, particularly in the stock area, is the outcome of a desire to attain further diversification. 
  • HNW investors assigned a sizable amount of their stock holdings to funds in 2018, and this proportion had increased by 2021. Diversification is a major force behind this trend, but there are many other factors at play as well.
  • Demand for thematic ETFs has skyrocketed – in particular, cybersecurity, robotics, blockchain, artificial intelligence, and other tech themes are in high demand.
  • ESG has permeated every aspect of wealth management.  All affluent strata, including HNW investors, have increased demand for ESG investments due to growing awareness of social responsibility and sustainability; around half of wealth managers report very strong or quite significant HNW demand. 
  • What are the main preferences for asset allocation in the HNW asset allocation market?  Alternatives, commodities, real estate, cash and near cash, bonds, and shares are the top asset classes preferred by HNW investors.

Source: globaldata.com

Asset Allocation Of High Net Worth Individuals In North America

  • The majority of assets held by high net worth individuals (HNWIs) in North America are in equities, accounting for around 38% of all assets held by HNWIs in the US and Canada in 2021. 
  • North America has the highest concentration of HNWIs and their assets. 
  • Who qualifies as an HNWI? A person’s financial holdings must total at least $1 million in US dollars for them to be deemed an HNWI. 
  • In addition to HNWIs, those with financial assets worth at least $30 million are referred to as ultra-high net worth individuals (UHNWIs). 
  • More than 200,000 UHNWIs can be found in North America, which has the largest concentration of UHWNIs globally – approximately four times as many as in China, which is the nation with the second-highest percentage of UHNWIs.

Source: Statista.com

More amazing information in this great article, with great charts too

Chubb and The Wharton School at the University of Pennsylvania recently conducted a study to examine how wealth managers and ultra-high net worth (UHNW) individuals evaluate assets and coordinate risk management activities. According to the study, which included a survey of 100 UHNW investors, family office members, and major financial decision makers, these inequalities are particularly evident with tangible assets like real estate, art collections, and other valuables.

Improving the Risk-Adjusted Return of Your Ultra-High-Net-Worth Clients’ Portfolios case studies.

The following are significant conclusions from the Wharton survey:

  • Just 53% of financial advisors claim to incorporate tangible assets in their valuation, compared to 87% of the ultra-wealthy;
  • There is a 37% gap between wealth advisors who work with an insurance agent or broker to protect such assets and UHNW investors who believe tangible assets should be included on their balance sheet; 85% of those with $30 million or more in wealth and 95% of those with $50 million or more in wealth said they would place more value on coverage and service than on cost; and, The capacity to handle challenging situations is the second most important skill.
  • The study found that, when modeled over a 40-year period, comprehensive liability insurance and property coverage may improve the risk-adjusted return on assets of total balance sheet portfolios, which include a family’s business, property, and valuables.

Research-Backed Portfolio Hedges For High-Net-Worth Investors

  • Research shows that quality stocks outperform equities with worse credit, losses, and inflated prices (which are typically characterized as companies with strong credit ratings, operating profits, and fair valuations).
  • When developing a hedging strategy, a primary objective is to lean toward quality and get rid of any extraneous holdings in index funds. Junk is very easy to find; for instance, it’s simple to find a list of S&P 500 stocks that are rated below investment grade.
  • Furthermore, research shows that the biggest components of every country, industry, and global stock market have a history of routinely underperforming (with strong countertrends in the late 1990s and the most recent current bull market). 
  • Research conclusively shows that when a company’s markets are sufficiently concentrated, government antitrust pressure causes its future stock returns to decline. Excessive index concentration decreases your average returns over time while increasing your risk. 


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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.

Michael Ryan
Michael Ryanhttps://michaelryanmoney.com/
A former stockbroker, financial planner, and owner of my own financial planning practice and then a property & casualty agency. I have since retired and decided I want to help individuals and business owners by offering personal financial coaching. And now, I have started my blog - www.michaelryanmoney.com - to bring financial literacy to everyone. In a short time I have already been quoted and featured in US News & World Report, Business Insider, Yahoo Finance, and more (https://michaelryanmoney.com/home/press/) As a financial planner, I helped people from all walks of life. If you have questions about money, I will help you find the answers at www.MichaelRyanMoney.com
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