The characteristics of the top HNW portfolios
A report by FinClear has identified six portfolio characteristics of successful high-net-worth (HNW) investors.
Its Special Investor Report compared those 10 per cent of HNW investors with top-performing portfolios against the characteristics of the bottom 10 per cent with poorly performing ones.
A “significant majority” of HNW investors were advised, the report said.
The top ones achieved an average return of 24.2 per cent over FY2022–23, outperforming the index by almost 10 per cent, to hold a portfolio worth over $1 million.
They tend to hold a balanced portfolio with an average of 15 holdings across six different sectors, predominantly in mature businesses. The benefit of holding mature companies meant average earnings of $70,000 from dividends, while poorer portfolios held investments in early-stage companies which were far less likely to pay out dividends.
“HNW investors – with their advisers – were good at picking the near-zeniths and floors in these share prices. They often correctly anticipated announcements this year that would see a drop in prices and sold before and bought back after. Or, they sold as prices climbed off the back of an announcement, after buying at lower prices earlier in the year.”
These included trades in Macquarie, CSL, ANZ and Woodside Energy during the July-August reporting season.
The most popular sector was financials, which made up 25.3 per cent of allocations, followed by materials at 21.6 per cent and healthcare at 9 per cent. In contrast, the poorer performers had almost 40 per cent allocated to materials and just 8 per cent invested in financials.
Around one-eighth was allocated to exchange traded funds (ETFs), which FinClear said indicated investors seeking alpha.
The top five ETFs commonly held were: Vanguard MSCI Index International Shares ETF, Vanguard Australian Shares Index ETF, iShares S&P 500 ETF, Vanguard MSCI Index International Shares (Hedged), and SPDR ASX 200.
The report also pulled out the differences between male and female HNW investors, and found that males held greater allocations to materials and technology while women favoured financials and consumer staples.
Males traded more and were less diversified than women, holding three sectors on average compared to five for women.
The top 10 per cent of HNW portfolio values was $2.8 million for females and $1.6 million for males, but FinClear attributed this to women receiving a higher proportion of inheritance as a result of their higher life expectancy.
AUTHOR
Laura Dew
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It mentions the return for the top performing clients & advisers as 24% on average. It would be more than interesting to know what effect advice fees, brokerage and MERs had on that gross figure. Anyone?