Super Rich Still Making Money In Crisis

Financial advisers to the world's richest people report some of their top clients have continued to make money throughout recent market turmoil by harnessing sophisticated investments out of reach to mainstream investors.

With equity markets plunging, most investors have suffered losses to their pension funds and portfolios, but those able to meet the multi-million dollar investment thresholds of private equity and some hedge funds are coming out ahead.

"You've got so many investment opportunities that are open only to very rich people," said one London-based financial adviser specializing in ultra-rich investors.

"The super rich are doing very well. They're getting good advice, they're getting access to stuff that other people don't have access to," he said.

Certain investment vehicles, such as hedge funds, can thrive at times of market stress because they are able to use risk management tools such as derivatives and make short-selling sales that make money when an asset price falls.

Hedge funds do well
Some big name hedge funds such as Brevan Howard, Man Group's AHL and Winton have continued to make gains for their investors during recent market volatility.

However, because some of the trades made by the funds can involve higher risks, and in the case of short selling, with theoretically infinite potential losses, regulators often place them off limits to small investors.

"There seems to be a moral argument against shorting, but from a purely practical point of view it leaves (hedge funds) in a better position to manage volatility," said portfolio strategist Johannes Jooste of Merrill Lynch Wealth Management, part of Bank of America Corp.

"It still remains the domain of the kind of client that can write a million dollar ticket or more ... From a regulatory point of view, the industry is not allowed to put the intermediate or the novice client into a hedge fund."

The fact that the super rich can write checks for millions of dollars also means they have exclusive access to the few real estate assets where prices are still rising, such as the central London residential property market.

Central London property pricier
While property prices around the world drop or stagnate, according to upmarket property consultant Savills, house prices in the smartest areas of central London are set to be up 8 percent this year.

"London is driven by the international buyer. They are after the trophy assets. Once you get out of the top end, it's a little more tricky, because people are dependent on mortgages and borrowing," said Philip Selway, head of the global property wealth team at broker Knight Frank.

Selway added that a couple buying a London property earlier this year were the first British clients he had seen in three years.

London commercial property is also proving a popular investment with the ultra wealthy. British private bank Coutts, owned by Royal Bank of Scotland, plans to launch a commercial property fund in October open only to clients worth 10 million pounds or more. (About US$16.5 million.)

"A lot of clients like the idea of being invested in high quality West End assets," said Julian Lamden, a client partner in Counts' private office division, which caters to the bank's richest clients.

Earlier this year Citigroup raised 330 million pounds (about US$546 million) via its private bank for a commercial property fund managed by Threadneedle, mainly from tycoons and rich families in Europe, the Middle East, Africa and Asia.

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  • by Fact Location: enc on Aug 21, 2011 at 09:44 PM
    Obama wants to extend the pay roll tax which helps low and middle classes. The Republicans are against this-they say it will cost too much. These are the same people who filibustered to protect the Bush tax cuts for the wealthy and claimed they cost us nothing! Watch what happens when Obama makes his job's plan public!
  • by Wolfgang Location: Chocowinity,NC on Aug 21, 2011 at 08:49 PM
    Rich Democrats like hire Tax Accountants & Tax Attorneys. Do not let Barlow & Lavon spin you into oh poor me!
    • reply
      by To Wolfgang on Aug 21, 2011 at 09:49 PM in reply to Wolfgang
      Of course Democrats have Tax Accountants & Tax Attorneys-they aren't fools! Today, with tax laws as complicated as they are, only an idiot would attempt to fill our large, complicated returns without help. The fact is, Wolfgang, they is no way to give to the government except through taxes. The difference is the wealthy Dems. are trying to change the laws in order to give more back to the government! Romney, on the other hand, is leveling his $10M mansion in Ca. because the 3,000 square feet aren't enough-he needs 11,000 square feet. Of course, this is only 1 of 5 houses he owns, but lets continue to protect his taxes-OK? He is actually against extending the pay-roll tax cut for the middle class!
      • reply
        by Really? on Aug 22, 2011 at 03:55 AM in reply to To Wolfgang
        Are you really naive enough to believe this? Yes, you can give money to the government, research it. These democrats who scream they want to pay more could easily do it, truth is they don't want to and if you naive enough to believe they do, you must be about 8 years old. Common sense, plain an simple.
  • by boxer on Aug 21, 2011 at 06:43 PM
    Won't be long.....we will be fighting each other for milk and bread, while the rich sit in their gated communities with stocked freezers.
  • by Barlow Location: Winterville on Aug 21, 2011 at 04:34 PM
    A flat tax would certainly be more equitable than what we have now. What I would not want to see is a comsumption tax. Because the rich spend a smaller percentage of their total income than those that must spend all they make to subsist, a consumption tax would hit the disadvantaged harder. Since the rich find ways around (loop holes) paying what they owe now, any flat tax would have to be "bullet proof" or just as it is now, they would find a way to get out of it..
    • reply
      by Anonymous on Aug 21, 2011 at 05:04 PM in reply to Barlow
      Thanks for your reply Barlow. I agree.
      • reply
        by Laughable on Aug 22, 2011 at 03:50 AM in reply to
        You know what hey say about people talking to themselves and answering themselves don't you Barlow?
  • by Lavon Location: Goldsboro on Aug 21, 2011 at 04:14 PM
    Well this is what the Republicans wanted..Give all the money to the rich and drain the lower and middle class..
    • reply
      by Anonymous on Aug 21, 2011 at 08:12 PM in reply to Lavon
      What makes you think all republicans are wealthy? News flash - WE ARE NOT!!! Stop with your ignorance, thought you were on vacation, or was that Barlow?? Both are still spewing ignorance!!
  • by Anonymous on Aug 21, 2011 at 02:55 PM
    I asked Barlow, below but I want to know what everyone thinks of a flat tax. Will it solve our problems?
    • reply
      by To anonymous on Aug 21, 2011 at 09:52 PM in reply to
      No, if you look at it close, you will see that the rate would have to be so high on the middle and poor that they could not survive. It would NOT be the 10% you see banded about! The rate would be higher for middle and lower and only lower for the wealthy, unless you raised the minimum for paying -0-.
  • by wanna be rich too, how about looking out for me! on Aug 21, 2011 at 11:27 AM
    When the economy is doing good they get rich....when the economy is doing bad they get rich...why are we even arguing about giving them tax breaks and loopholes, they need it like they need a hole in the head. 98 percent of Americans must be stupid. The wealth gap is the largest its ever been in history, thanks to the GOP.
    • reply
      by James on Aug 21, 2011 at 02:15 PM in reply to wanna be rich too, how about looking out for me!
      how about you getting out and working for it, doing something productive. Go borrow half a million dollars on your home and invest it in a company, hire some employees, get all the city, county, state, federal licenses, permits, tax numbers. Yeah, it's so easy to sit back and want someone else to "look out for you". You have every opportunity to get rich yourself, but you DON'T. Why ? Because you're a typical whining liberal that is jealous of others that put all their savings on the line and now are rich. You all think it's so easy. It's hard work, it's LONG LONG hours year after year. Try it sometime.
      • reply
        by to james on Aug 21, 2011 at 04:31 PM in reply to James
        I work full-time, been doing it all my life, have a small in-home business(Rental Houses)as well. I and most people consider me extremely Blessed. I don't need any handouts from YOU or anybody else. If I can pay my way, I am sure as "Heck" YOU and the wealthy can do so also, and pay their share of taxes. In case you haven't noticed, the wealth gap is the largest its ever been in history. Every bill passed by YOUR congress is geared towards the wealthy, and puts the average Middle Class American behind the eight-ball. The system needs to be more balanced. I will wave bye to you when I pass you in my Z06 (the red one, not the blue). You Broke Back Chump!
        • reply
          by James on Aug 21, 2011 at 06:40 PM in reply to to james
          I'll be sure to wave at you driving your used Z06. They are very poor investments. I'll keep my million in the bank. As far as handouts, you should be mad that all these people live off of your hard work. But if you want to keep supporting all these low lifes, go right ahead. I choose not to, although the law forces me to provide for them. Oh yeah, a Ferrari would have been a much better investment and way mroe exotic. Trust me....
        • reply
          by To to James on Aug 21, 2011 at 09:54 PM in reply to to james
          And I am sure the "bank" James is keeping his millions in is off-shore, just like the others who "love" this country, but just don't want to support it!
        • reply
          by James on Aug 24, 2011 at 12:39 AM in reply to to james
          No, my bank is First Citizens in New Bern. I pay my taxes and don't hide money. Guess a slum lord would know all about such stuff. You really have a poor attitude, glad I don't rent from you. I know several millionaires in New Bern and you would NEVER know they had any money. Unlike you, thinking that driving a car makes you someone. We call that "new money". I prefer the old money crowd. We drive our old trucks. Wear our simple clothes and smile at all the rude obnoxious wannabes like you.
    • reply
      by boxer on Aug 22, 2011 at 07:09 AM in reply to wanna be rich too, how about looking out for me!
      If you get rich off had work, good for you. If you get rich cheating the working man, not so great. The rich run this country, they dictate what we pay for bread, milk, a house, car, and for a funeral. The rich keep getting richer, not by hard work, but by greed. How big of a house is big enough? How much money is enough? The way this country is going, won't be much longer we will be in a war. Not with another country, but with each other. When the masses are homeless and penniless their will be a class war. The down and out want to feed their children too. So keep on doing what your doing. And by all means keep calling the working have nots low lives. If it weren't the working man, you would be broke. Who do you think bought what you were selling? You must be of the Northern clan, and Southern would never speak as harsh as you. You know what the brown spot is? Kiss it for me.
  • by trader on Aug 21, 2011 at 11:20 AM
    After reading the recommendations of prominent financial managers and such... It seems they're getting spooked now. This decline appears to be psychologically feeding upon itself.
  • by Citizen Location: Greenville on Aug 21, 2011 at 10:52 AM
    What a class warfare baiting article. This is trash.
  • by Lubba Location: yes on Aug 21, 2011 at 06:48 AM
    just know, they can tell you anything and most foolish people are dumb enough to beleive it, but reality is that both parties protect the rich. Don't listen to what someone says........but what they actually do.....
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