Banks are desperately looking for investment opportunities for their rich clients. The wealthy increasingly are shunning the financial market in favor of a very traditional investment strategy.

A fair number among the so-called ultra-high-net-worth individuals have shifted assets over the past years, according to a study by Knight Frank, a U.K.-based consultancy. Property ownership among those who have more than $10 million in assets rose significantly in recent years.

Knight Frank polled hundreds of private bankers and wealth managers for its survey – the participants manage more than $3 billion for rich clients. The results of the survey confirmed that the rich have a strong penchant towards owning something in brick and mortar.

Reducing Equity Exposure

The rich clients on average owned 3.6 properties in 2018, up from 2.9 in 2017. The number does not include their first and second residential homes but only real estate as a class of investment.

Such investments currently amount to 21 percent of UNHNW portfolios, the second biggest component. Stocks are the biggest component with 27 percent.

More than a third among the super-rich clients reduced the size of their equity holdings as a proportion of the total last year, Knight Frank said. This trend evidently owed much to the wobbles on the markets, but the shift toward real estate investments was a trend that had begun earlier.

Rising Wealth

If residential housing of the rich is added to their property investments, the share of real estate in their portfolio reaches almost a third. This seems to have helped the performance of their portfolios because two-thirds of the surveyed private bankers stated that the wealth of their rich clients had risen in 2018 – with only 16 percent taking a cut.

The conclusion also shows that the rich are playing in a league of their own, not least in respect to the performance they achieve. After all, assets under management in the industry as a whole declined substantially last year.

Safe Haven Effect

The findings of Knight Frank are born out by earnings published by private banks, with real estate investments showing great pull ever since the big financial crisis. With bond markets offering unattractive returns and a great degree of volatility in the stock markets, investors sought the safe haven of real assets – in brick and mortar that is.