The attitudes and tendencies of the wealthiest investors are changing, as they look for more than just returns, but also social purpose and cultural cachet.
Global demand for a more holistic approach to wealth management is increasing – and asset diversification, including alternative investments, is “becoming a mainstay of the investment landscape,” according to a new study by The Future Laboratory on behalf of Cult Wine Investment.
Quoting Robert A Stranger & Co. Inc., the study reported that global alternative investment sales reached $31.6 billion in the first half of 2021 (all figures in U.S. dollars). Further, global alternative assets under management are projected to reach a record $15.6 trillion by 2024, according to investment data company Preqin.
The study noted the relative dearth of cryptocurrencies has shifted Bitcoin to be the more appealing alternative to gold, with the digital currency set to grow in supply by roughly 1.25% each year. Additionally, alternative collectors are utilizing their vinter knowledge, transforming wine investments into “culturally and financially-rewarding passion projects.”
“More than diversifying beyond stocks, cash and bonds, ultra-high-net-worth, high-net-worth and emerging investment communities are increasingly opting for unique, culturally relevant and personally-driven asset classes,” the study stated.
The study noted the “mass affluent class” (individuals with assets of between $905,000 and $4.4 million) will more than double their alternative investment spend, moving from 14% to 32%, “in the coming years,” although it didn’t specify the timeline.
“Ranging in returns, stability and paths to ownership, these commodities are as aspirational as they are financially rewarding – resulting in new communities where investors are more hands-on with their trading and ownership, and assets are more closely tied to their identity.”
The study highlighted four emerging communities of investors that it says will catapult alternative investments forward into the future.
The first cohort is “identity investors,” who choose assets that align themselves with the zeitgeist and bolster their sense of identity. The group is about more than chasing cultural clout – it prides itself on the curation of cultural capital, demonstrating brand association in real time through asset classes and investments they select. One example is a non-fungible token (NFT) platform.
The second group is “the altruisters.” Those are optimistic, entrepreneurial activists who use their investments and assets as a starting point for doing good, through things such as sustainable initiatives and practices.
The third community is “thrill-seekers,” who have “a hunger” for volatile investments, gravitating toward the emerging and unregulated worlds of crypto and NFTs.
“This cohort prides themselves on their ever-evolving investment portfolio,” the study said. They also want to achieve prominence of the “the first pioneers” in the crypto space.
The fourth community – the “heritage hunters” invest in their passions (such as wine), watch them mature and reap the rewards of investment returns. This group tends to see their investments as an extension of themselves and something with which they have kinship.