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Citigroup Private Bank - Capital market ideas

By Ravi Raju, Head of Investments, Asia Pacific & Middle East

Youssef Affany, Senior Investment Counsellor, Europe , The Citigroup Private Bank

Asset allocation for the $20-million investor

In this difficult market, investors need to look beyond equities and bonds and consider alternative investments like hedge funds and private equity. While many financial advisors use quantitatively driven asset allocation models to construct portfolios for high-net-worth private clients, those models typically represent only liquid assets, such as stocks, bonds, cash, and in some cases, hedge funds.  They generally do not account for illiquid assets such as private equity and real estate - the analytical and quantitative hurdles have historically precluded such a comprehensive model. Citigroup Private Bank employs a new methodology “Whole Net Worth Asset Allocation” to overcome this hurdle.

The Whole Net Worth Asset Allocation system presents two sets of recommended portfolios: one for U.S. taxable investors and one for non-U.S. taxable investors.  Within each set there are five levels of risk-return objectives - from full capital preservation (lowest risk) to maximum capital growth (highest risk). 

Depending on the investor and specifics of their situation, our general asset allocation recommendation calls for some approximate mix of 15% in total fixed income, 70% in total equity income and 15% in hedge funds.

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