Elite entrepreneurs are bullish on equities, says study

Wade Balliet
Posted by Wade Balliet
Investment Strategy

Do you ever wonder what motivates successful entrepreneurs and drives their investment strategies?

Pensive middle-aged man in glasses looking out a large window, with the cityscape reflection obscuring some of him and the room he's in.BNP Paribas’ yearly survey gets into the minds of elite entrepreneurs (those with investable assets in excess of $10 million dollars) around the world for insights into where they are putting their money now and where they plan to put it in the future.

Stocks gain in dominance

For the first time in five years, equities ranked as the top asset class for entrepreneurs globally – ahead of fixed income, cash, and even their own businesses when it comes to investment. Furthermore, for U.S. entrepreneurs, the average portfolio allocation to equities reached 28% – higher even than the 20% global average.

Clearly these investors – given the equity market’s run over the past nine years combined with continually depressed return potentials in fixed income and cash assets – have settled on stocks as the favorite for ongoing gains. Even as the business cycle grinds into the later innings and risks start to form on the horizon, equities are still showing resiliency due to tremendous earnings growth over the past two quarters.

However, the big question for 2019 is: If this recent market volatility continues and the risk premium to own these securities rises, will equities finally lose their luster? Will investors lose their optimism?

Growth trends emerge for sustainability, technology

If you’ve ever wanted to pick the brain of a millionaire, the 2019 BNP Paribas Global Entrepreneur Report truly offers data-driven insights into their views on investing. I wanted to share just a few takeaways that grabbed me:

  • Entrepreneurs (especially millennials) are bullish on entrepreneurs – Globally, 85% of elite entrepreneurs make private investments into high-potential companies. The most enthusiastic advocates of private investments are millennials. In fact, they are twice as likely as Baby Boomers to have invested in venture capital funds, start-ups or have made angel investments. This may mean that, even more than older generations, millennials strongly believe in the power of startups to generate money and aren’t turned off by the higher potential risks.
  • Sustainability equals growth – The entrepreneurs we studied expect socially responsible investments (SRI) to be a top-five sector for high growth in the future. Carbon footprint reduction, increased access to healthcare and education, increased microfinance loans, and improvement in the literacy rate were all identified as priority areas for their SRI investments. This confidence in the long-term potential of SRI investments resembles our own commitment to investing in the energy transition and our communities.
  • Technology as a growth catalyst – Globally, technology is the top sector for future investment, and 69% of U.S. elite entrepreneurs identify it as their top choice as well. Specifically, the growth in valuation as well as media attention around the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) has helped spur broader interest in the potential of the technology sector and interest in regional tech companies.

Stay tuned here, as my colleagues will be sharing further takeaways from the report.

In the meantime, I encourage you to dive into the full report and check out the data visualizations that bring it to life.

Our Voice of Wealth app, available at the Apple iTunes and Google Play stores is another great place to check out the 2019 report.

For more information on our approach to wealth management and how we can help you reach your financial goals and aspirations, please contact us.
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