Property seen top alternative for rich investor

By Martin de Sa'Pinto, HedgeWorld

GENEVA (Reuters) - Real estate remains the leading alternative investment for the world's wealthy, despite all the talk about private equity, hedge funds and commodities, private bankers said at the Reuters Wealth Management Summit.

"The mass affluent -- those with up to $30 million in investable assets -- tend to use REITs (real estate investment trusts) or funds of real estate funds, while the even wealthier will be more inclined toward direct investments," said Christopher Meares, chief executive of HSBC Private Bank UK, Channel Islands & Luxembourg (HSBA.L: Quote, Profile, Research, Stock Buzz).

Credit Suisse's (CSGN.VX: Quote, Profile, Research, Stock Buzz) clients have on average 15 to 20 percent of their investable assets in real estate, which compares with 5 to 7 percent in private equity, hedge funds and structured products, according to Arthur Vayloyan, head of private banking investment services and products.

In Italy, the private banking industry has traditionally competed with direct real estate investment for assets, said Dario Prunotto, UniCredit (CRDI.MI: Quote, Profile, Research, Stock Buzz) head of private banking.

Real estate mutual funds are a relatively recent development and are beginning to gain ground, he said, adding that they now form part of the private banker's armory in Italy.

For clients, the biggest change recently has been the growing awareness of the potential risks, and many clients see real estate as some protection, Vayloyan said.

"Market shifts can destroy your wealth, and you therefore want non-correlated assets with a defined risk profile," he noted. "As protection, people like structured products, and they want real estate holdings for the cash flows."