BNP Paribas Wealth Management - “2021 Global Entrepreneur & Family report” - A focus on portfolio strategy of Elite Entrepreneurs and families in light of the Covid-19 pandemic
KEY TAKE-AWAYS: portfolio choices and investment outlook
- Equities have topped US and European entrepreneurs’ portfolio allocations for the third year in a row. 53% increased their portfolio allocations in stocks over the last 12 months – especially in APAC.
- Private equity and real estate had enduring appeal to UHNW entrepreneurs during the COVID-19 crisis. 53% of UHNW entrepreneurs increased their allocations to private equity over the last year. Real estate was also an attractive option during the pandemic.
- Inflation, volatility, the changing tax environment and corporate debts are the biggest concerns for the future. 38% consider inflation a serious risk: it is ranked as the number one concern in Europe and the GCC. In the US, continued stock market volatility is more worrying. High levels of corporate debt are problematic in APAC.
- 52% are more likely now than 6-12 months ago to consider credit. The primary use of credit is leverage for their businesses.
- Smart technology, portfolio diversification and energy transition are the most promising investment themes for 2021.
- For 82% of Entrepreneurs, enabling smart technologies is a priority (investing in health, AI, 5G).
- The energy transition and the “Green Deal” remain a key focus in Europe and the US especially around food and clean water (food production, new consumption trends such as veganism, agricultural technology). 76% of entrepreneurs are already acting on that front or interested in doing so in the next 12 months.
“Equity and private equity are two growth asset classes where entrepreneurs have clearly gone for growth in their portfolio allocations. This has proved to be the correct choice in hindsight with very strong performance both from the listed equity markets and private equity funds, from the lows seen in March 2020 up until today” explains Edmund Shing, Global Chief Investment Officer BNP Paribas Wealth Management. “Many investors have been cautious about the commercial real estate asset class. But we would argue that a positive orientation towards real estate is certainly warranted. Not only has real estate outperformed global equity markets since 2001 on average, but also it tends to outperform following recession, which is our current environment now”.
“Entrepreneurs are certainly very favourable towards all forms of new technologies, not just in PCs but also in agriculture, health care, with the use of artificial intelligence techniques for instance, and finally 5th generation super-fast mobile internet.”
“Private Equity continues to be a core asset class for entrepreneurs and families around the world. This reflects their natural affinity with entrepreneur-led businesses as well as the higher returns and diversification that the asset-class offers,” explains Richard Clarke-Jervoise, Global Head of Private Equity and Private Debt for BNP Paribas Wealth Management. “Private investments have proved to be an excellent way for entrepreneurs and families to address key investment themes. These include accessing fast-growing companies and investing in inflation-protected assets such as infrastructure. These are examples of areas where private investments have a structural ‘edge’ over public markets and are highly complementary with a traditional equities allocation.”
“The challenging conditions of 2020 proved the resilience of the private equity model and the advantages of its ‘patient capital’ approach. Entrepreneurs and families have learned many of the lessons of previous economic cycles and, rather than retreating to more liquid assets in times of volatility, have continued to invest in private equity and increased their overall allocation to the asset class.”
BNP Paribas Wealth Management is a leading global private bank and the leading private bank in the euro area. With a presence in three regions (Europe, Asia and the United States), it employs more than 6,800 professionals who support a client base of private investors in the protection, growth and transmission of their wealth, bringing long-term value to them, their families and society. As of March 31, 2021, the bank had €402 billion in assets and was recently elected “Best Private Banking” in Europe, North Asia, the Western US and the Middle East.