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Rich to Invest More in Commodities, Reduce Cash

Wealthy investors plan to increase their allocations to commodities and private companies while decreasing their cash holdings this year, according to a survey released today.

About 48 percent of respondents said they plan to add to commodities investments during 2012 and 55 percent said they intend to make more direct investments in private companies, according to a survey by the Institute for Private Investors. About 45 percent plan to increase real-estate holdings, said IPI’s survey of its members, who are families with at least $30 million in investable assets.

“It’s part of that whole movement toward actually owning real assets,” Mindy Rosenthal, executive director of IPI, said in a telephone interview. “They’re looking at going back to the old school way of making money.”

The Dow Jones-UBS Commodity Index (DJUBS) fell 13.4 percent in 2011, according to data compiled by Bloomberg. Real estate investment trusts returned 8.1 percent last year, according to the Bloomberg REIT Index (BBREIT) of 129 publicly traded property owners. Most REITs are publicly traded companies that own and operate property including apartments and office buildings.

Emerging Markets

Commodities and agricultural real-estate may be attractive ways to benefit from growth and rising standards of living in emerging markets, said Michael Tiedemann, chief investment officer of New York-based Tiedemann Wealth Management, which manages about $6.5 billion. The firm may increase its allocation to real estate, commodities and oil- and natural-gas pipelines by as much as 4 percent through investments in private equity and stocks in the next year, said Tiedemann, whose clients on average have about $65 million under management.

About 36 percent of survey respondents said they’ll decrease cash holdings this year. That may be because some families see market volatility as a buying opportunity, Rosenthal said.

IPI members, who were questioned in November, said they expected their portfolios to return 4.9 percent on average for 2011.

Wealthy families surveyed said they anticipate the Standard & Poor’s 500 Index (SPX) will return 6.4 percent on average this year. The index returned 2.1 percent including dividends during 2011, according to data compiled by Bloomberg.

About 70 individuals representing 70 families responded to IPI’s online survey of its 345 member families. About 91 percent of IPI’s members reside in the U.S. New York-based IPI provides education and networking for its members.

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