How Do The Very Wealthy Invest Differently?

It’s hard to get data on the investment patterns of the very wealthy. Many surveys are intended to cover the entire population, from to bottom, so they don’t offer many data points for looking at the behavior of the top 1% or the top 0.1%. In addition, any survey about economic facts, like personal wealth, is only as good as the memories and willingness-to-disclose of those taking the survey.

Dollar, Money, Cash Money, Business, Currency, Finances

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Thus, one of the hot topics in economics research is finding ways to access “administrative” data–which refers to data that was collected for other purposes, but in an appropriately anonymous form can be made available to researchers. For example, researchers looking at income inequality have found ways to used appropriately anonymized income tax data. For wealth data, Cynthia Mei Balloch and Julian Richers found a source of such data to address the question of “Asset Allocation and Returns in the Portfolios of the Wealthy” (presented at the 2021 Conference on Research in Income and Wealth held at the Summer Institute of the National Bureau of Economic Research, July 19-20, 2021). Just in case this isn’t yet broad knowledge in the economics community, I’ll also add that the NBER holds many workshops, methods lectures, and mini-conferences during its Summer Institute, and hours of material of of top research economists presenting their current work is available at the NBER YouTube page).

Here’s how Balloch and Richers describe their data:

[W]e use anonymized portfolio-level data from Addepar, a leading technology provider for the wealth management industry. Addepar provides an advanced financial reporting and analysis software platform for private wealth advisors. These advisors range in scale from single family offices to large wealth management firms with thousands of individual advisors and client portfolios. Advisors use the platform to get a comprehensive picture of asset holdings and returns across different asset and sub-asset classes, ranging from standard equity and fixed income investments to private equity, real estate and collectibles. While individual investors can access their own account data directly, advisors are the primary users of the software. These include family offices, private wealth advisors at banks, and
other advisors. Across 373 managing firms, we observe over 50,000 client portfolios on the platform, each representing an individual household. The range of total holdings ranges from the mid-six
figures to multi-billion dollar portfolios, with an average total size of portfolios of 16.8 million
(median 1.3 million) at the end of 2019. By this time, there are close to 1 trillion in assets
recorded on the platform …

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