Super-rich millennials are defying the way their parents have been investing for decades
The 2008 financial crisis, which happened as many in the 21 to 36 age bracket came of age, seared memories of traditional asset classes like stocks cratering and retirement savings being wiped out.
"I won't say there's a mistrust of fixed income or equities or anything paper-related," said Joseph Quinlan, the chief investment strategist at US Trust, which surveyed over 800 high-net-worth adults with at least $3 million in investable assets. Millennials are just more interested in more "sophisticated" assets like structured products, venture capital, and private equity, the survey found.
Favoring other assets reflects a greater appetite for risk among millennials; seven in 10 that US Trust surveyed said they cared more about generating income for near-term financial goals like paying down debt than long-term capital appreciation.
Also, millennials have greater concern than older age groups about impact investing: buying into companies that would generate returns but also improve the environment and society. "They want to do good and well with their investments," Quinlan said about the focus on both impact and return.
US TrustThis is happening as the world pays more attention to issues like women's rights and climate change, but also amid empirical studies that show gender-diverse firms outperform in the market and are less volatile.That's not to say millennials are shunning traditional investments like equity in public companies. But they're not as eager to invest in plain-old stocks like baby boomers, which US Trust categorized as those aged 53 to 72.
The survey suggested that boomers are trying to make up for missing out on returns during the eight-year bull market, in which the benchmark S&P 500 has more than tripled.
However, that fear of missing out, even after the shock of the last crisis, may be driving boomers to also take on too much risk, US Trust said.
"We've all been trained or told that as we get closer to retirement, we'll reallocate towards fixed income and cash and away from equities," Quinlan said. But amid bond yields that are near the lowest level of their lifetimes, "we're just not seeing that."
Among the so-called Generation X, aged 37 to 52, "there is a psychology of wanting to own something that's a harder asset ... more tangible than, say, something on a screen." That includes farmland, timber, and oil and gas properties.
As for perhaps the most popular, intangible asset class - bitcoin - Quinlan said he observed it as more of a curiosity than an investable asset that's being committed to.