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June 9, 2014

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Tiger 21’s Top 10 Investment Strategies of the Very WealthyHigh-net-worth survey shows wealthy investors understand the need to diversify BY KATHLEEN MCBRIDE, ADVISORONEJuly 30, 2010Very wealthy investors have the opportunity to invest in a more diverse collection of assets than manyother investors. For one thing, the high minimum investment hurdles for certain kinds of investments canmake it harder to diversify unless your portfolio is of a certain size. For another, more of the very wealthymay be accredited investors, which qualifies them to invest in certain assets that regular individualinvestors cannot.That doesn’t always mean that people who very wealthy are much more investment savvy than otherindividual investors–although some undoubtedly are–the point is that often their expertise is in anindustry or a venture that is unrelated to financial services and investing. It’s not about intellect, but rather area of experience.For someone who is not actually on Wall Street, the array and complexity of investments now makes itmore challenging than ever for investors of all levels of wealth.There are, however, groups that provide an educational forum for wealthy investors learn about and understand these financial or investmentoptions and allow them to network among their peer group for answers to these and other financial questions.One such group is Tiger 21, a “peer-to-peer learning group” of 140 members who have assets of $10billion overall. Tiger 21 offers them the opportunity to gather in small groups of peers and discuss oftenwith an expert or product manufacturer a certain investment or financial topic or area of investing.Tiger 21 recently polled its membership about the investment managers and assets they favor, and cameup with their Top 10 Investment Strategies. While it should be no surprise that equities are high on thelist–33% of the Tiger 21 members invest in equities in one way or another, the allocation to equities wasnot huge, according to a release on July 29 from the group. The majority, 77%, of those equity investorsallocated only 15% or less to equities; and nearly one-third of those investors allocate less than 5% toequities.More than three-quarters, 77%, of those who did allocate to equities did so through some kind ofmanaged vehicle: 26% in mutual funds, 23% in managed accounts, 14% in index funds, 12% in ETFsand 2% in long-only hedge funds. Individual stock investments are the choice of 23% of these investors;however, the most often mentioned stock was Berkshire Hathaway, which, of course, is like a fundinvestment. (This editor is an investor in Berkshire Hathaway.)Equities are followed by municipal bonds, as 28% of the Tiger 21 survey participants said they allocate tomunis. In fact, more than half of those who invested in munis, 57%, said they make up more than 21% oftheir portfolio, and another 21% said they invest more than 16% in munis.The manager mentioned most often by the group was the Slevin Wealth Management Group of RBC Wealth Management.Long-short equity funds are popular as well, with 22% of the participants investing in those funds, whichseek to benefit from going long the equities that are most likely to rise as well as selling short those they deem likely to fall in value. Most allocate less than 10% to this strategy, but “at least 13%” of participantsallocated 30% or more to long-short equity. Members most frequently mentioned managers GreenlightCapital and Alkeon Capital Management in connection with this strategy.Tiger 21 members also invest in multi-strategy; and event-driven/distressed; and private equity/debtfunds, with 19% of members allocating to one of those three strategies. Elliott Associates and Brigadewere the popular managers for multi-strategy funds, while Hildene Capital, Paulson & Co., SandalwoodSecurities are preferred event-driven/distressed fund managers. Golub Capital and Bain Capital arementioned as favored private equity/debt fund managers.Real estate and master limited partnerships (MLPs) are darlings of a smaller group of the participants,at 14% each. Participants typically nibble at these categories, with 90% of those investing in MLPsallocating less than 10% to the vehicle, and 89% of those investing in real estate allocating 15% or lessto that asset in their investments–although Tiger 21 notes in its announcement that: “In fact, several Tiger21 members made their fortune in the property market and maintain sizeable holdings in this sector.” Asfor MLPs, Chickasaw Capital Management and Neuberger Berman’s Income Plus Portfolio are favored managers.Global macro funds were the favorite choice for 13% of the participants–but again, most dedicatingsmaller portfolio percentages to this strategy. Of those who invest in this strategy, 89% allocate lessthan 15% to the strategy. But 11% of the participants who use this strategy allocate 21% to 30% of theportfolio to it. the most frequently cited manager here was Balestra Capital.And finally, gold captures the fancy of 6% of the Tiger 21 survey participants. One-quarter invest lessthan 5% in gold, but half of the gold buyers allocated 11% to 15% to the asset and the other 25% invest16% to 20% in the metal. Participants are almost evenly divided between owing gold ETFs and the physical commodity.”The survey shows the diverse, yet sophisticated nature of Tiger 21 members’ investment portfolios.In making their decisions, many of our members have come to rely on one another for input on assetallocation and investments whether via our trademarked Portfolio Defense process or through individualdiscussions with their group members,” said Michael Sonnenfeldt, founder and chairman of Tiger 21.