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SUMMARY:Asset Allocation and Returns in the Portfolios of the Wealthy - Cy
 nthia Balloch (LSE)
DTSTART:20211028T120000Z
DTEND:20211028T130000Z
UID:TALK161884@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Despite accounting for a large amount of total wealth\, there 
 is little direct empirical evidence of the investment behavior of wealthy 
 households. Based on a proprietary database of investment portfolios and r
 eturns\, we document three new facts about ultra-high net worth portfolios
 . First\, asset allocations change strongly with total wealth\, as super-w
 ealthy households hold a much larger share of alternative investments\, su
 ch as private equity and hedge funds\, and a lower share of liquid assets\
 , such as public equities. The data includes a significant number of portf
 olios large enough to explore allocations and returns within the top perce
 ntile of the wealth distribution\, including the top 0.01 percent. Second\
 , while realized returns are increasing with wealth\, Sharpe ratios are br
 oadly similar across the top of the wealth distribution. This suggests tha
 t investment skill does not differ among investors in upper portions of th
 e wealth distribution\, but that risk tolerance increases with total wealt
 h. Third\, we use the data to explore whether returns differ within narrow
  asset classes\, and find that  returns on alternative assets in particula
 r are increasing in wealth. This indicates that access and manager selecti
 on play a large part in determining returns and raises questions about the
  benefits of broadening access to delegated investing in private assets. T
 aken together\, these findings substantially improve on existing empirical
  evidence on return heterogeneity in the U.S.\, which is increasingly unde
 rstood to be critical in both macroeconomic dynamics and asset pricing.
LOCATION:Online
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