U.S. millionaires favor real estate over other types of alternative investment

Real estate is in a class of its own when it comes to investment in alternative asset classes (i.e. not stocks, bonds or cash), a recent survey by Morgan Stanley reveals. Of U.S. high net worth (NHW) investors with $1million dollars or more in financial assets, 77% own real estate, while 35% own Real Estate Investment Trusts (REITs).

Real estate and REITs are top of the list by a wide margin. Next on the list cited by millionaires are collectibles (34%), precious metals (28%), private equity (27%), real assets (oil, gas and mining, 17%), private real estate funds (16%), hedge funds (16%), and venture capital (13%).

Morgan Stanley’s Wealth Management Investor Pulse Poll periodically surveys HNW investors. During the 4^th quarter of 2013, Morgan Stanley polled 1,004 U.S. investors aged 25 to 75 with at least $100,000 in assets. One third had more than $1 million: the survey poses questions about alternative asset classes only to that group.

When asked what they expect to buy in 2014, 33% of millionaire investors named real estate and 23% named REITs. Collectibles (20%), private equity (19%) and precious metals (16%) came further down the list of priorities.

With fixed-income yields staying low and equities becoming expensive, wealthy investors are looking at real estate as an alternative to provide capital returns and rental income.