Senior Partner Practice of St. James's Place (Singapore) Private Limited
Knowledge Centre - Resources

Benefits of Private Assets

The Heritage Partnership Oct 23

Private markets represent a substantial proportion of global wealth. Amidst disappointing returns from stocks and bonds, investors increasingly seek to revitalise traditional asset allocation strategies by heavily weighting private asset investments in their portfolios.

Private asset investments offer an alternative way to take advantage of market inefficiencies. They’re easier to define based on what they are not. Private Investments don’t fall into the conventional investment categories: stocks, bonds, and cash. They are not generally available in pensions and traditional stock market investing. When you think of private assets, you can think of things like:

Private assets have primarily been high net worth individuals. That’s because most private investments have a higher minimum investment than traditional stock market investments. Private assets can also be more complex and require more expertise and research. Hence, it poses more risk than traditional investments to novice investors.

Why Choose Private Investments?

Despite private assets’ reputation as being illiquid in nature, there is relatively less information available for research compared to traditional investments. Here are some of the best reasons for you to add private investments to your portfolio:

Broader Diversification: You know it’s best not to put your eggs all in one basket. Private investments allow you to step outside the traditional investment realm and back away from the stock market a little. Creating a portfolio of alternatives helps broaden the amount of diversity you have in your overall investment strategy.

High Returns: Private assets are typically more illiquid compared to traditional investments. However, where there is risk, there is also room for great reward. Private Investments have the potential to create unparalleled returns for investors willing to stray from traditional investing. Because of this, private assets can provide a better way to build wealth.

Lower Volatility: Traditional investments can gain and lose value drastically in short periods. However, alternative investments won’t experience the same volatility because they’re not affected by the same factors as the stock market. Take COVID-19, for example; while demand increased with people having more disposable income thanks to less spending on travel, eating out, etc., supply was constrained because manufacturing units were shut for

nearly six months, creating a huge backlog. This resulted in prices of watches on the secondary market rising or being stable most of the time.

Safeguard Wealth: With the above factors, a private asset gives you a great way to safeguard your wealth and invest in something besides “paper”.

Following your passion, Fun: Unlike a share of stock or bond investment, you get to enjoy your collectables while waiting for them to appreciate in value. You can display a rare painting on your wall or drive a vintage car on weekends. True collectors revel in the thrill of the hunt—searching out the item of their desire is almost as satisfying as owning it.

How do private assets fare as financial investments?

The trappings of wealth, such as beautiful art, vintage wine, fine cars and classic watches, not only have an aesthetic value, but they are also good investments. An excerpt from the latest wealth report published by Knight Frank shows that private assets are inflation busters, with Cars, Art and Watches being the best performers among private assets in 2022.

Source: Knight Frank’s The Wealth Report 2023

The Knight Frank Luxury Investment Index (KFILL), which is an overall index based on the weighted performance of a basket of luxury Investments below. The KFILL rose by a healthy 16% during 2022, comfortably beating inflation and outperforming the majority of mainstream investment classes, including equities and even gold.

The Hidden Gem?

Private Investments offer a wealth of advantages that extend beyond the conventional understanding of investing. They can be instrumental in wealth preservation, providing more customized investment strategies and, most importantly, resilience during economic downturns. While they may not receive as much attention as stocks and bonds, private assets should be regarded as an essential component of a well-rounded investment portfolio. The

addition of private assets may just be the hidden gem you need to take your investment portfolio to the next level.


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