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Private Equity Overtakes Listed Stocks As HNW Investors' Darling - JP Morgan Poll

Tom Burroughes

19 May 2016

Private equity is the most favoured asset class among high net worth investors, beating listed stocks, according to a survey of more than 800 HNW investors by . 

Some 33 per cent of respondents to the survey, taken from Europe-based clients, said private equity was their most favoured asset class, with public equity markets getting a vote of 28 per cent. This was a change from last year when more than half of respondents chose public equities as their favourite.

Hedge funds also attracted some attention, with 16 per cent of investors expecting them to provide good returns over the next year, while some clients also thought commodities (14 per cent) would fare well. 

Additionally, over the past two years there has been a clear shift among investors when it comes to geographical allocation for equities, with the majority now favouring European equities over the US. This year, nearly half (47 per cent) of investors see European equities outperforming other regions, while 35 per cent still believe US equities will lead the way, the US bank said.

“Following a shaky start to the year, a number of factors are worrying financial markets worldwide, including a surprise geopolitical event. In Europe, Brexit and Spain’s general election are the focus, while many are watching the US presidential race closely,” the bank said.

Client fears surrounding the Chinese economy also remain, with 30 per cent believing it could suffer a hard landing this year.

Some regional variations can also be observed, with over half of German investors (52 per cent) mostly concerned about global geopolitics, whilst Spanish investors (9.6 per cent) fear this issue the least.

US rates
When asked where the US Federal Reserve Federal Funds rate is expected to be by the end of 2016, 37 per cent of respondents said rates will rise to between 1 per cent and 1.5 per cent. However, caution remains amongst some investors, with over half (59 per cent) expecting the Federal Funds rate to remain under 1 per cent for the year. Geographical opinion is consistent across Europe, except for Spain where there is an even divide between investors who think rates will remain under 1 per cent and those who believe it will rise towards 1.5 per cent.

Three-fifths (61 per cent) of clients believe oil prices will remain close to where they currently reside, between $30 and $40 per barrel, for the rest of 2016. 

The survey was conducted as part of JP Morgan Private Bank’s latest "Investment Insights" series, held in seven of Europe’s leading cities earlier this year.