(No Ratings Yet)

Many Wealthy Americans More Satisfied with Their Alternative Investments Than Traditional Investments During Last 12 Months

Posted by J.S.

July 29, 2008

Bank of America Survey of High Net Worth Indicates Investors Understand Risk and Rewards, But Want Oversight and Assurance

BOSTON, July 29 /PRNewswire/ — Many wealthy individuals who held alternative investments expressed greater satisfaction over the last 12 months with every category of alternatives, including hedge funds, venture capital, real estate and private equity, than their more traditional investments, including stocks and bonds, according to “The Bank of America Survey of Attitudes Toward Alternative Investments,” released today.

The survey, sponsored by Bank of America (NYSE: BAC), studied more than 400 high net worth investors with greater than $3 million in investable assets. Of the survey respondents, 267 held investments in alternatives overall, including 92 who held investments in hedge funds or hedge funds of funds. Nearly one-third (32%) of the data collected focused on the attitudes of individuals with investable assets of $10 million or more.

While only 30 percent of wealthy Americans surveyed who held alternative investments expressed satisfaction with the more traditional investment categories in their portfolios, many noted greater satisfaction with their investments among the four major categories of alternative investments; 51 percent with their hedge funds, 44 percent with venture capital, 41 percent with real estate and 35 percent with private equity.

Additionally, the findings indicated a positive relationship between satisfaction with alternative investments and the length of time the investments were held. Investors with 10 or more years of experience in alternatives were almost twice as likely as those with fewer than 10 years of experience to be “extremely satisfied” with their total portfolio since their initial investment.

“Alternatives are timely investments because dislocations create the types of opportunities that funds with stable, long-term capital thrive on,” said David Bailin, president, Bank of America Alternative Investment Solutions. “Our study demonstrates that alternative investors recognized that even in stressful market conditions, alternative investments are an important component in an overall portfolio and can help mitigate portfolio volatility.”

Negative Headlines Deter Some, But Not Most

Negative stories published about hedge funds appear not to have deterred experienced hedge fund investors, according to the survey’s findings. When asked if negative publicity about hedge funds impacted their investment decisions, 44 percent of those invested in hedge fund vehicles said no and only 20 percent said yes.

“The number of respondents who say they avoid hedge funds out of fear has been described as a trend by some industry watchers. However, experience with alternative investments and access to advice seems to have overcome fear, according to the survey findings,” Bailin said. “For example, the majority of respondents with investments in hedge fund vehicles (55%) said that they are not deterred by the possibility that they will lose more money than they can afford to by investing in such funds. Only 10 percent said they were afraid.”

Current Perceptions of Hedge Funds

“Our study demonstrates that, despite the portrayal of hedge fund investors as risk-takers investing in aggressive managers, many high net worth investors have a realistic understanding of the risks associated with their holdings and realize that large alternatives managers are institutional in their investment approach and the quality of their investment professionals,” Bailin noted.

Noteworthy findings regarding hedge funds include:

– More than half (57%) of wealthy Americans surveyed who invest in hedge funds expressed satisfaction with these vehicles since their initial investment, with only 5 percent expressing dissatisfaction

– When asked to describe their perceived level of risk for certain investments over the next five years, 54 percent of investors in alternatives viewed hedge funds carrying risk, while only 17 percent perceived risk around stock mutual funds

– Nearly six out of ten wealthy individuals surveyed (59%) said they are more likely to invest in a hedge fund that is registered with the U.S. Securities and Exchange Commission (SEC) than a non-registered fund. Close to half (48%) of investors invested in any type of hedge fund instrument also said they are more likely to invest in an SEC-registered hedge fund compared to a non-registered fund

– Roughly half of the 400 overall respondents (48%) and about the same percentage of those invested in hedge funds (51%) said they were more likely to invest in a hedge fund that has been carefully screened. Just 24 percent of overall respondents and 18 percent of those invested in hedge funds did not believe third-party screening was important

“The number of alternative investment vehicles has grown exponentially, yet there are few easy ways for investors to assess fund performance or manager talent,” said Bailin. “This is why the industry must commit to educating investors, strengthening performance reporting and providing standardized information to enable investors and their advisors to make better investment decisions.”

About The Bank of America Alternative Investments Study

The insights offered by “The Bank of America Survey of Attitudes Toward Alternative Investments” are based on quantitative analysis of data collected online in May 2008 from individual investors. The sample included 403 individual investors with a minimum of $3 million in investable assets and an average of $7.9 million in investable assets. The final weighted data included 121 (32%) respondents with investable assets of $10 million or more. Of the 403 survey respondents, 267 held investments in alternative investments (hedge funds, commodities, venture capital, private equity and investment real estate), including 92 who held investments in hedge funds or hedge funds of funds. The survey was conducted by the independent research firm, Forbes Consulting Group, LLC.

About Bank of America Alternative Investments Solutions

Alternative Investment Solutions (”AI Solutions”) is part of Global Wealth & Investment Management, a division of Bank of America Corporation, and provides qualified clients with a range of alternative asset products. Bank of America’s Global Wealth & Investment Management division serves, among others, affluent, wealthy, ultra wealthy and institutional clients. As of March 31, 2008, Global Wealth & Investment Management has more than $890.9 billion in client assets under administration, including $607.5 billion in assets under management.

About Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,100 retail banking offices, more than 18,500 ATMs and award-winning online banking with more than 25 million active users. Bank of America offers industry leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries and has relationships with 99 percent of the U.S. Fortune 500 companies and 83 percent of the Fortune Global 500. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange. http://www.bankofamerica.com/

Alternative investments are sold to qualified investors only by a Confidential Offering Memorandum or Prospectus. Alternative investments provide limited liquidity and include, among other things, the risks inherent in investing in securities and derivatives, using leverage and engaging in short sales. An investment in an alternative investment fund is speculative, involves substantial risks, and should not constitute a complete investment program. An alternative investment fund may be highly leveraged. The volatility of the price of its interests may involve complex tax structures and there may be delays in distributing important tax information. These funds may not be subject to the same regulatory requirements as mutual funds, and their fees and expenses may be high. This summary is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy interests in any fund. Interests are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other governmental agency.

An investment in alternative investments is not suitable or desirable for all investors. Investors may lose all or a portion of the capital invested.

AI Solutions performs advisory services through Banc of America Investment Advisors, Inc. (BAIA), Bank of America Capital Advisors LLC (BACA) and U.S. Trust Hedge Fund Management, Inc.; all are SEC-registered investment advisors and are indirect wholly owned subsidiaries of Bank of America Corporation.

Photo: http://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com

SOURCE: Bank of America

CONTACT: Reporters May Contact: John Yiannacopoulos, +1-212-819-5927,
john.yiannacopoulos@bankofamerica.com, or Colleen Lavery, +1-617-434-7826,
colleen.lavery@bankofamerica.com, both of Bank of America

Web site: http://www.bankofamerica.com/