(By: Steve Wallace, CAIA, Member – AllAboutAlpha.com Editorial Board) – Notwithstanding the recent out-performance of hedge funds, it’s been a tough year for High Net Worth Individuals (HNWI) and their even wealthier cousins, the Ultra High Net Worth Individuals (Ultra HNWI).  A recent Capgemini/Merrill Lynch report shows just how tough.  The “2009 World Wealth Report” showed, not surprisingly, that gains made during 2006 and 2007 were completed eroded primarily due to more aggressive asset allocations.

2013

However, that being said, it’s certainly not all doom and gloom.  The report forecasts that by 2013, HNWI financial wealth will total $48.5 trillion up from $32.8 trillion at the close of 2008 and well in excess of the $40.7 trillion at the end of 2007.  The figure below also illustrates the far higher forecast for the growth rate of wealth in Asia Pacific at a whopping 12.8% p.a from 2008 to 2013 (click to enlarge).

More Conservative Assets

Most of the people to whom I speak in my travels through Europe and the Middle East on behalf of the CAIA Association would probably agree that HNWIs significantly increased their exposure to more conservative assets during 2008, thus reducing their exposure to equities and alternative investments.

But as the figure below shows, HNWIs also increased their exposure to another alternative investment – real estate – as they saw new opportunities arise – mainly in residential real estate (click to enlarge). More…