#2 Geopolitics
After consumer health, GWIC members identified geopolitical headwinds as a top concern. History suggests that conflict is inflationary and induces volatility, necessitating portfolio construction solutions that offer investors multiple ways to win. Importantly, members believe that geopolitical dynamics also offer investment opportunities. In fact, the “security of everything” and “onshoring” were voted top themes to get right over the next 12 months, second only to AI.
#3 Asset Allocation
In our prior survey in early 2024, council members believed that high-net-worth investors were most overweight in Cash. Fast forward to October, and half of the members believe that investors are overweight Public Equities, closely followed by Cash. With rates coming down, the return on Cash will decline from today’s levels. Given elevated valuations in the large cap segment of the S&P 500 as well as strong returns of late, the outlook for Public Equities over the next five years is likely less rosy as compared to the impressive double-digit returns over the last two years.
How might investors rebalance? As we saw in February, most GWIC members believed that high-net-worth individuals were underweight Alternatives. Heading into 2025, the council members view Private Equity and Public Equities as the most attractive asset classes, compared to Public Equities and Bonds in the previous survey. The group expects Cash and Treasuries to look stressed during the next six months, echoing results from the February survey. At KKR, we believe that in the current phase of the cycle, as growth bottoms and rates decline, investors should tilt portfolios to favor equity-based strategies, extend duration within credit to lock in yields, and lean into structures that mitigate volatility, such as downside protection through infrastructure.
In “An Alternative Perspective: Past, Present, and Future” KKR’s Global Head of Macro and Asset Allocation, Henry McVey, estimated that there are now more than $15 trillion of assets under management in the Alternatives space. Interestingly, though, while $15 trillion may sound large in absolute size, it is less than 11% of total global GDP and only 2.4% of total financial assets. We see this trend likely surpassing the current level of investment, reaching at least an estimated $24 trillion by 2028.
#4 Investor Goals
When it comes to helping high-net-worth individuals meet their goals, generating income remains the top priority – a focus unchanged since February. Other goals cited by council members include materially ramping up exposure (i.e., reducing Cash holdings as many clients have 20-30% of their portfolio in Cash), maximizing returns, and preserving capital. Nearly 90% of GWIC members noted they expect to increase allocation to private market investments when working with financial advisors. Their rationale: They understand the role the illiquidity premium can play in compounding capital in a tax efficient manner, building wealth for future generations. Importantly, innovative fund structures and technology solutions, including the introduction of evergreen vehicles, are expanding access to Alternatives for individuals worldwide.
