A Look At What HNWI’s Are Doing
Over the past couple of days I have been attending an exclusive conference for HNWI’s (High Net Worth Individual) in Southern California.
The guests were mostly from the United States, but there were a fair number of foreign attendees.
Globally, almost 70% of HNWI’s are self-made, so it’s safe to say that these people know how to make and grow their money.
So what were the hot topics at the event?
Well, there was a lot discussed, but here are my five main take-aways:
Yup, tech is still hot and even the wealthy are heavily investing in this sector.
However, during one talk, the speaker polled the audience. He asked:
- How many were increasing their exposure to tech?
- How many were decreasing their exposure to tech?
- How many were maintaining their exposure to tech?
The majority of the room raised their hand for increasing or maintaining their exposure to tech, and only a handful of people said they were decreasing their exposure.
Later, the same speaker polled the room again about their understanding of tech. He wanted to know what they thought of virtual reality, artificial intelligence, and augmented reality.
Overwhelmingly, the room was excited for tech, but at the same time, they also admitted that they didn’t understand how these technologies worked.
I’d assume that the general population would probably respond the same.
I don’t think this is a serious issue, as most investors probably don’t fully understand the industries they are in. But, it does make me wonder how investors are increasing their positions in technologies that are more and more complicated.
One of the most important rules in investing is to NOT put your money into things you don’t understand.
This has been making news for a while this past year.
The general story is that HNWI’s are not happy with the performance of hedge funds in comparison to investing in just an index fund.
For example, with a management fee of literally a fraction of a percent, an investor can put their money into an index fund.
Conversely, a hedge fund normally charges a 2 and 20 fee (2% management on the front end and 20% carry on the backend) AND requires a minimum investment of sometimes $15 million dollars.
The problem is that most hedge funds have been providing similar returns as the most popular index funds… but the hedge funds are still charging big bucks and requiring huge minimums.
For HNWI’s, this is starting to get very frustrating.
Why should they pay a fund manager huge money for returns that are almost identical to a free index fund?
There were a lot of debates over this topic, but I got the general consensus that many HNWI’s were looking to pull their money from these hedge funds and deploy their capital in other areas…
I know, I know, I know.
Yes, Bitcoin and blockchain technology was a popular topic.
But, truthfully, there was not much intelligent discussion about cryptocurrencies.
Very few event attendees had a full grasp of how these digital currencies worked, other than that they’ve seen massive price increases over the past year.
And, to their credit, they didn’t speculate too much about what they didn’t know.
The overall feeling was one of, “this could be a big deal and we need to figure this out soon.”
“The single most explosive market of the past 100 years.” That’s what one of the speakers said about marijuana.
It was tough to get a good read of the group, as not everyone wanted to share their true feeling about cannabis.
Whether this was to protect their reputation or simply from uncertainty, there wasn’t a definitive opinion one way or another.
However, several attendees openly shared that they had ‘invested heavily’ into the space and said that they were excited to increase their positions.
I can count the number of times Trump, taxes, and general excuses were brought up on one hand.
Or in other words… there were NO EXCUSES.
I found this to be refreshing and a good reminder about successful people.
Instead of blaming things on politicians, high taxes, or over regulation, the attitude was more, “This is the reality we are living in, so how do we push forward?”
And that was the best take-away from the entire event.