Where Can Canada’s Ultra-High-Net-Worth Investors Find Further Diversification?

The term “High Net Worth Individual” (HNWI) carries a certain prestige in the finance world. These individuals or households possess significant liquid assets, making them a unique and influential segment of the investor community. While many investment strategies are applicable across the board, Canada’s Ultra-High-Net-Worth (UHNW) investors have access to diverse opportunities tailored to their specific needs.

Let’s explore where these individuals can find further diversification, including insights into real estate investments and Mortgage Investment Corporations (MICs).

What Does It Mean to Be a High Net-Worth Individual?

HNWIs, by definition, have substantial liquid assets at their disposal. This typically starts at the million-dollar threshold in Canada, although some institutions set the bar at $500,000. Regardless of the specific threshold, HNWIs are well-positioned to engage in diversified investment strategies that align with their long-term wealth-generation goals.

What HNWIs Look for in Investments

HNWIs recognize that investing goes beyond asset price appreciation. Unlike most investors who primarily focus on public markets, they are more inclined to explore private markets, including private equity, hedge funds, mortgages, startups, and real estate. In fact, alternative asset classes make up close to 50% of the portfolio of UHNW investors. By comparison, the standard investor holds only around 5% in alternatives.

Their unique perspective underscores the importance of investing in assets that exhibit low correlation with public markets, offering growth potential and regular distributions.

High Net Worth Individuals do a few things that standard investors should mimic:

Look for investments that offer higher potential than traditional bonds and GICs.
Diversify portfolios further to offer more protection.
Reduce the amount of fees they’re paying.
Rebalance their portfolio frequently.
Don’t follow the trends or copy the latest buzz.
Invest in the private market.
Use tax deductions to their advantage.
Work with professional fund managers.

What Investors Can Learn from HNWIs

One of the key lessons that all investors can draw from HNWIs is the value of diversification. HNWIs assemble portfolios that span industries, markets, geopolitical boundaries, and asset classes. This disciplined approach helps them minimize risk and optimize returns over the long term. It’s a strategy that investors of all wealth levels can apply.

Additionally, HNWIs are acutely aware of the impact of fees on their portfolios due to their more significant investments. Even a slight difference in management fees can translate into substantial savings over time.

How HNWIs Can Find Alternative Assets to Meet Their Investment Needs

Over the past two decades, the allure of alternative assets has grown significantly, offering diverse avenues for capitalizing on the investment strategies of UHNWIs. Alternative assets encompass a broad spectrum, including exchange-traded funds, venture capital, private equity, physical commodities like gold, and real estate investments.

Real Estate Investments: A Core Element of Diversification

Real estate investments hold a special place in the hearts of HNWIs. These tangible assets offer potential for appreciation and the benefit of regular income streams through rent. In addition to direct property ownership, investors can explore property-based securities like Real Estate Investment Trusts (REITs) or consider private real estate market opportunities through Mortgage Investment Corporations (MICs).

For investors seeking alternative assets that bridge the gap between real estate and mortgages, MICs present an intriguing option. MICs are pooled funds that primarily deal in private mortgages and real estate. They offer an avenue for investors to participate in real estate financing while enjoying the benefits of regular distributions and potential capital appreciation.

Closing Thoughts: Embracing Diversification

With alternative assets gaining popularity, there are numerous ways to capitalize on the investment strategies of UHNW investors. These include purchasing ETFs and mutual funds that provide exposure to alternatives, investing with venture capital or private equity firms, and considering alternative investments in real estate.

At Cooper Pacific, we offer a unique opportunity to participate in the world of alternative assets. Our Mortgage Investment Corporation specializes in private mortgages and pooled real estate investments, providing investors with the potential for steady income and capital growth. To learn more, get in touch with Jordan on our team today.