Asset Allocation: Canada
Even though specific information on asset allocation for Ultra High Net Worth Individuals (UHNWI) in Canada was unavailable in the public domain, we were able to find a significant amount of information on the asset allocation for High Net Worth Individuals (HNWI) in Canada. For instance, HNWI in Canada allocate various percentages of their assets to investments in real estate, hedge funds, derivatives, foreign currency, private equity, cash and fixed-income, and equities. Further details in regard to our findings and research strategies follows below.
ASSET ALLOCATION OF HIGH NET WORTH INDIVIDUALS IN NORTH AMERICA
- In 2018, the asset allocation of High Net Worth Individuals (HNWI) in North America was segmented as follows:
- 37.1% of assets were allocated in equity.
- 22.3% of assets were allocated in cash and cash equivalents.
- 18.1% of assets were allocated in fixed income.
- 12.4% of assets were allocated in real estate.
- 10.1% of assets were allocated in alternative investments.
- The above general asset allocation of HNWI in North America paints a picture of what HNWI individuals in North American countries (including Canada) invest their assets on.
ASSET ALLOCATION OF HIGH NET WORTH INDIVIDUALS IN CANADA
- Like "unforgettable novels and great-fitting bras," successful investment portfolios must have a good structure.
- It is usually a necessity for wealthy Canadians to choose an asset allocation that will ensure both peace of mind and ample funding for the future because with more disposable income comes the temptation to invest in very promising deals and passing fads.
- According to financial advisors that work with HNWI, the wealthy have a specific structure to their portfolios.
- Nancy Grouni, a certified financial planner that works for Objective Financial Partners Inc noted that wealthy Canadians "have greater exposure to real estate and alternate investments in their portfolios – as much as a third."
- According to Grouni, in a typical portfolio, 25% of assets are allocated to real estate with the exclusion of personal residences and 10% of assets are allocated to alternate allocations that include hedge funds, derivatives, foreign currency, and private equity.
- Additionally, a third of the portfolio or 33.33% of assets allocation consists of cash and fixed-income vehicles, and the balance i.e. around 31% (100% - 25% + 10% + 33.33%) is in equities.
- Grouni also noted that HNWI are generally more comfortable allocating their assets on non-traditional, alternative ways of investing with most of them "investing in private equity through personally held corporations."
- Susan Latremoille, a wealth advisor and director of wealth management at the Latremoille Group, Richardson GMP Ltd noted that the wealthy usually invest in alternative investments such as real estate, private equity, and hedge funds. However, with real estate HNWI do not have to buy properties as they can invest through financial markets in real estate exposure.
- Latremoille also noted that HNWI also invest in private companies via "private equity funds, funds that invest in, and/or buy, private companies." Additionally, wealthy Canadians also structure their portfolios by adding investments that protect it. For example, a certain portion of assets can be used for hedging against a potential decline in the stock or bond market, while others are currency-hedged so that they are able to protect against fluctuations in the rise or fall of the dollar.
- Tom McCullough, the chairman and CEO of Northwood Family Office noted that hedge funds are still a common investment with HNWI but their popularity has dwindled because of high fees and poor performance. Now many wealthy people are investing in private equity even though the high number of investors drives prices up and makes investment returns less.
We started research by looking for information on the asset allocation of Ultra High Net Worth Individuals (UHNWI) in Canada in a variety of credible resources that in our first strategy were press release websites like PR Newswire, GlobeNewswire, Business Wire, Newswire, and PRWeb. Through this strategy, we were able to find a report on Business Wire titled "Canada Wealth Report 2016 — Research and Markets" that contained information on HNWI and UHNWI asset allocations across 13 asset classes. Unfortunately, this report was hidden behind a paywall and we were unable to derive any useful information from it.
In our second strategy, we targeted industry/market specific resources in our search for the required asset allocation information for UHNWI in Canada. These resources included the Wealth Management, Globe and Mail, Investopedia, KKR, Hawk Eye Wealth, Global Data, LinkedIn among others. However, after a thorough search through these resources, we were only able to find information on HNWI in Canada, global HNWI asset allocation, and the previous report on UHNWI in Canada that we found using the first strategy above (this report was again limited by a paywall).
Consequently, we decided to expand our research to statistical — Statista and IBIS World, news — Financial Post, Bloomberg, and Canadian Business, and consulting firm resources — KPMG, Deloitte, McKinsey, Bain and Company, and Boston Consulting Group. After a thorough search for the required information through these resources, we were only able to identify general information on wealth management and information of HNWI.
Because it was recommended in the research criteria that if the information on UHNWI in Canada was unavailable we could focus on HNWI in Canada, that is what we did. After using the research strategies highlighted above, we were able to find a significant amount of insightful information that we have presented in the findings section above. Additionally, we also applied the above strategies in our search for specific information on asset allocation for venture capital and technology for both the UHNWI and HNWI in Canada, but unfortunately, nothing that relates to these investment avenues was available in the public domain.