10 key investment themes of the wealthy

10 key investment themes of the wealthyFor many of the world’s billionaires, 2010 has been another difficult year.

In Australia, equity markets have fallen about 2% and many entrepreneurs outside the mining sector have seen their fortunes shrink. And while Wall Street has risen a respectable 8% over the last 12 months, the state of the US economy means many top billionaire investors are still nursing losses.

However, 2011 will bring fresh hope and, most importantly, new ways to make money. Here are 10 key investment themes that have or may emerge among the world’s wealthy in 2011.

Media

It wasn’t so long ago that we were writing off the media sector as a billionaire target. However, that’s all changed in the last few months. First we saw James Packer and old media pal Lachlan Murdoch launch a raid on Ten Network shares, and immediately push for executive chairman Nick Falloon to depart, which he will do later this year. Then we had Gina Rinehart’s shock raid on Ten shares – a deal no-one saw coming, and no one really understands.

But it’s also happening overseas. This past week we’ve seen Virgin Group chief Richard Branson launch a new iPad-only publication called Project, which will be published monthly. With media asset prices still attractive, and ad markets slowly recovering, this sector could be a target for a few more speculative plays.

The United States

One of the more intriguing investments of the last week was placed by New Zealand billionaire (and Australia’s richest man) Graeme Hart, who paid $US375 million for US car parts maker, UCI International, and took on $US605 million of the company’s debt.

The deal has been seen by many as a big bet on the US economy recovering, although Hart may have simply spotted an undervalued asset that was too good to pass up. Either way, Hart will join Warren Buffett in cheering for the US to pick up sooner rather than later.

Gold

Gold prices have risen 23% this year and while George Soros has used the word bubble, he and other the billionaire investment gurus aren’t giving up their gold investments any time soon. Recent filing from Soros Fund Management and John Paulson’s fund Paulson & Co show gold remains among their biggest holdings.

Soros recently took a stake in iShares Gold Trust, while Paulson remains the single biggest shareholder in SPDR Gold, an exchange traded fund trading in the US.

The web

Mark Zuckerbeg, Sergey Brin, Larry Page – over the last few years, it has been web-based businesses that have created many of the most recognisable young billionaires in the world. Expect it to happen again in 2011. Google’s $US5 billion takeover bid for US group buying site Groupon values the 20% stake of 29-year-old founder Andrew Mason at about $1 billion.

Mason is an intriguing character and having founded Groupon in 2008, it’s not hard to see why he’s a little bemused at all the attention he’s getting.

Other web billionaires-in-the-making recently nominated by Forbes include Facebook executive (and Napster founder) Sean Parker and Mark Pincus, founder of online gaming company Zynga.

Finance

The financial sector is an area we are likely to see plenty of action in over the next 12 months, although exactly what kind of action depends on where a billionaire is based. In the US, the last three months have seen Soros and Paulson trim their stakes in financial stocks, particularly those affected by the great mortgage repossession scandals that have rocked the industry in the second half of 2010.

That said, Warren Buffet’s Berkshire Hathaway boosted its stake in US bank Wells Fargo in the September quarter, and Branson remains keen to expand his banking operations in the UK and Australia. And reports in Australia do suggest big investors are becoming interested in bonds outside the AAA and AA ranks once again.

Mining

The hottest sector in the world will continue to create big individual fortunes in 2011. At the top end of town, Rinehart could be on the cusp of something very special with her coal mine plans in Queensland, while entrepreneurs such as Eike Batista continue to build an empire based around oil, gas, gold and other energy projects. But watch the smaller mining companies in Australia too – this is where fortunes of $200-300 million can quietly be amassed if companies get a good run of luck.

Angel investing

As the IPO market heats up in Australia – and right now there is a backlog of floats trying to get away before Christmas – we can expect to say high-net worth individuals wading in to the market looking to place a few long-range bets on smaller companies.

Computershare founder Chris Morris is a great example of an entrepreneur who is now operating a quiet little angel investing operation with some success. Lang Walker, Bruce Mathieson and of course, the Pratt family, are other sharemarket dabblers likely to look for new opportunities as capital markets open up.

Exits

While some entrepreneurs are looking to get rich by putting money in, others will be looking to get rich by selling some or all of their assets. Already this year we’ve seen Kevin Maloney of mining services company The Mac Group sell up, as has recruiter Julia Ross and beverages veteran Peter Brookes. Next year, retail veteran Brett Blundy is tipped to sell his Bras N Things chain, while John Beville is also said to be looking to sell his Top Ryde Shopping Centre in Sydney.

Philanthropy

The sheer size of the philanthropic donations being made by the likes of Warren Buffett, Bill Gates, Richard Branson and Michael Bloomberg mean that managing philanthropic activities will become less of a warm-and-fuzzy sideline and more of a full-time occupation for some.

We’ve already seen Gates largely step away from Microsoft to oversee the operations of his foundation, which has about $US35 billion in assets under management, and Branson has talked about spending more of his time managing his charity operations. They will continue to wield considerable clout, but it may be used in different ways.

Tax

Tax isn’t exactly an investment theme, but it will be a major financial issue for the rich to confront in 2011. In a number of countries around the world, taxes on the wealthy are seen as a popular way to restore damaged budgets – and perhaps get a bit back from the common voter. Don’t expect this trend to change, although the rich will fight hard to oppose any moves to increase their tax burden.

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