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November 23, 2015

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Cash allocations fell to their lowest level since 2008, the high-net-worth investing club reported

ByMichael S. Fischer

Tiger 21 reported Wednesday that its high-net-worth members’ third-quarter allocations to private equity, public equities and fixed income increased, while those to cash, real estate and hedge funds decreased.

The quarterly allocation report measures the aggregate asset allocation exposures of 360 members with investable assets of some $35 billion total, based on their portfolio defense presentations, Tiger 21 said in a statement.

The biggest moves during the third quarter occurred in private equity and fixed income, which rose two percentage points from thesecond quarter, and real estate, which dropped by a similar amount.

Real estate remained the dominant allocation at 28%-higher than its historical average over several years, but lower than 30% allocation in the second quarter and 29% in thefirst quarter.

Tiger 21 said in a statement that a relatively large percentage of its members had created their wealth in the real estate business and continued to own significant real estate portfolios.

“In the last year, Tiger 21 has experienced growth in its membership, which leads us to suspect that the increased allocation is more a function of higher concentrations of real estate owned by newer members and significant increases in valuation, rather than shifting allocations within existing portfolios.”

Public equities represented the second largest allocation by members at 24%, up from 23% in the second quarter and in line with recent allocations levels.

Private equity investments, which had declined modestly since their recent high of 22% in the third quarter of 2014, reversed course this quarter. Allocation levels rose to 20% from 18% in the previous two quarters.

Members typically invest in some combination of three private equity areas, according to Tiger 21: 20% in venture capital and private equity funds, and 80% in direct investments in their own companies and other private companies.

“Strong allocations to private equity, public equity and real estate show that Tiger 21 members are uniquely positioned to take appropriate risk by investing in these assets to preserve wealth in the current low interest rate environment,” Michael Sonnenfeldt, the organization’s founder, said in the statement.

“As a result, we would expect to see steady or increased allocations to asset classes our members know that have historically delivered sustainable gains.”

Fixed income rose from 9% in the April-to-June period to 11% in the third quarter. Tiger 21 noted that fixed income levels have been in the 11% to 12% range since last year’s third quarter, lower than allocation levels recorded since 2007.

Hedge funds and cash both experienced one percentage point declines in allocations during the third quarter

Hedge fund allocations stood at 7%, the same level as at the start of 2015 and in line with a 7% or 8% allocation range since the third quarter of 2013.

Cash fell to just 9% over the quarter, its lowest level since the third quarter of 2008.