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Where the Rich Will Invest This Year

If you’re still licking your wounds from last year’s market performance, here’s a bit consolation. The rich didn’t do that well either.

According to a study from the Institute for Private Investors, the average return expected for 2011 for wealthy families was 4.9% — down from an average of 11.26% in 2010. The study, called the Family Performance Tracking survey, looks at families with investible assets of $30 million or more.

Granted, the wealthy beat the overall S&P, which is more than they could say in 2010. The S&P in 2011 increased just 2.1% inclusive of dividends. In 2010 , the same families under-performed the S&P’s 13% return.

The big question is where wealthy investors are putting their money this year, since they have such an outsized impact on financial markets and asset classes.

Generally, the rich investors say they have a positive outlook, expecting the S&P to return an average of 6.4% in 2012. But their actual investing plans suggest a more dour outlook for the U.S.

Fully 44% plan to increase their holdings in global equities, which includes markets outside the U.S. That’d down from 64% last year.

The rich prefer commodities, real-estate, private companies and cash this year. Fully 48% plan to increase their allocation to commodities in 2012, and 45% of respondents to real estate. Only 36% plan to decrease their cash holdings.

More than half of the families hope to increase direct investments in private companies, and they’re “increasingly bullish on tangible assets such as gold, land and artwork,” the study said.

“The common refrain we’re hearing from investors this year is that they’re decreasing their exposure to public markets and relying less on financial instruments and trading strategies,” said Charlotte Beyer, IPI founder and CEO. “Many investors are continuing to position themselves defensively.”

The study is another sign that for the rich, wealth preservation is taking priority over wealth creation.

Are you investing like the wealthy in 2012?