Wealthy investors and family offices have already been reducing their stock holdings as part of a broader shift from public to private markets.
When stocks tumbled Monday, with the S&P 500 and Nasdaq down 3%, wealthy investors neither panicked nor jumped in to buy, according to several advisors. They did have a lot of questions."The common question from clients was 'What's going on?'" said Sean Apgar, partner and co-head of portfolio and wealth advisory at BBR Partners, which advises ultra-wealthy clients."It was more out of curiosity; there was no real motive for action.
William Sinclair, head of the financial institutions group and the U.S. family office practice at J.P. Morgan Private Bank, said a growing number of clients have so-called"separately managed accounts," discreet accounts designed to hold a specific group of assets or stocks. With separate accounts, clients can more easily sell stocks that have declined in value and realize losses they can use to offset capital gains from their winning stocks, known as"tax-loss harvesting.
Gifting stocks that have declined in value carries more benefits, since it allows investors to gift more stock under the exemption amount. While the S&P 500 is still up roughly 10% this year, after gaining 24% in 2023, ultra-wealthy investors and family offices are continuing to shift more of their money into alternatives, especially private equity. Many see private companies as more stable and profitable over the long term compared to equities — especially after days like Monday. And they can have more impact on management with direct stakes in private companies.
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