HNW Entrepreneur Investors Smile On Stocks; Think Sustainability Costs Returns - Study

Tom Burroughes, Group Editor, London, 27 January 2020


Asset allocation
The single-biggest asset holding of respondents is equities (19 per cent), alongside one’s own business (19 per cent); fixed income accounted for 14 per cent, and cash accounted for 13 per cent. At the bottom end came angel investment, at 3 per cent.

There is a regional difference in how investors think about valuations of equities. European investors (46 per cent) are twice as likely as those in Asia (27 per cent) and the US (23 per cent) to be concerned about the high valuation of stocks, the report said. 

Turning to the risks stemming from currency volatility, the study showed that only 43 per cent of investors are worried about how foreign exchange fluctuations will hit portfolios. But this picture is not uniform: A majority of investors in China, Hong Kong and Singapore are worried.

“Which currency entrepreneurs hold their cash [in] will determine the level of risk, as clearly there are different risks associated with investing wealth in US dollars or Indian rupees. In Asia, entrepreneurs will often prefer US dollars to reduce their exposure to currency risk,” BNP Paribas’ Bronès said.

Political uncertainty also adds another dimension, the report said. As far as the Brexit process is concerned, 52 per cent of UK entrepreneurs, for example, are concerned about their investments due to what might happen to the sterling exchange rate. 

BNP Paribas set out investment themes for clients this year. For example, it predicts that economic growth “will remain weak and vulnerable to shocks”, making it necessary to hold “high-quality” companies with strong profit margins, low gearing and low profitability variation. Investors should also consider taking advantage of current row-back from globalisation, such as concentrating on regional markets, holding more safe-haven assets. Another theme is governments’ increased infrastructure spending, creating opportunities in building/construction stocks, renewable energy and clean transportation stocks, and infrastructure-related mutual funds or private equity funds. 

Within the environmental/sustainability theme, already mentioned, BNP Paribas WM suggests that clients should look at areas such as “clean energy” and water and waste management.

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