Drawing from its proprietary database, Lexington, Massachusetts-based Advisor Perspectives says that high and ultra-high net worth (HNW/UHNW) investors, whose assets are managed by RIAs, are indexing a mere 3.8% of their marketable securities. The study’s data suggests that wealthy investors using a financial advisor employ active management, in the form of separately managed accounts and actively managed mutual funds, for the vast majority of their assets.
The study also found that:
- HNW and UHNW investors have only about a quarter (23.8%) of mutual fund assets in index funds and exchange traded funds (ETFs). While this is double the mutual fund industry average of 10.8% of mutual fund assets in index funds, this means that only 3.8% of their total assets are indexed, since mutual funds represent only 15.8% of those assets, according to the report’s authors.
- Just 1.0% of assets are indexed to broad-based U.S. market indices, such as the Dow or the S&P 500. The remaining 2.8% is indexed to international markets and to subsections of the U.S. markets.
- Wealthy investors make significantly greater use of ETFs than do other investors. In fact, indexed ETFs comprise 78% of index funds in the study, as compared to 36% for the mutual fund industry.
The database reflects investments in marketable securities and does not include alternative investments (e.g., venture capital, private equity, hedge funds, etc.). If alternative investments were included, the portion of assets indexed would be further reduced.
The Advisor Perspectives database consists of approximately $50 billion in assets coming from RIAs serving HNW and UHNW clients. The database is segmented by account size, and the average account size in the tier representing the largest accounts is $3.7 million.
For more information, including a copy of the study, please visit www.advisorperspectives.com.