The Billionaire Portfolio

delfeldOne of the most common questions I get when speaking at conferences is how much to allocate to international and emerging markets? Well, not much more than ten years ago, the typical equity portfolio was simple and straightforward:

90% – U.S. large cap, mid cap and small cap
10% – international

But since then, attitudes and the global economy have shifted considerably. The bottom line is that you need to get comfortable with more international in your portfolio or risk falling behind.

Let’s consider a few possible guidelines…

World stock market value

This is the breakdown if you look at the market value of stock markets around the world. (MSCI World index):

  • USA – 41%
  • United Kingdom – 14%
  • Japan – 14%
  • Emerging markets – 12%

World GDP

Looking at world GDP paints quite a different picture though:

  • US & Canada – 28%
  • European Union  – 30%
  • Emerging markets – 32%
  • Japan/Pacific -10%

World’s Billionaires

The Forbe’s 2013 list with 1,426 global billionaires highlights the rapid rise of emerging markets. Just a decade ago there were only 20 BRIC (Brazil, Russia, India, and China) billionaires while 108 new BRIC billionaires were created in 2011 alone.

  • USA – 31%
  • Asia-Pacific – 27%
  • Europe – 26%
  • Latin America – 9%
  • Middle East & Africa – 7%

It was tedious work, but working through the list I found some surprises. Turkey has 33 billionaires, Taiwan 21 and Indonesia 13 billionaires compared to Japan with just 26. China now has 168 billionaires – second to America. Vietnam posted its first billionaire, the Pacific Rim accounts for a surprising 68% of these tycoons and emerging markets are home to 38% of billionaires.

These numbers clearly show a trend of a larger role for Pacific and emerging markets as the economic engine of the world but the numbers also raise a couple of key questions. How much of the rise in emerging market concentrated wealth is due to record commodity prices? Are many of these BRIC billionaires the beneficiaries of crony capitalism and monopolies or are they entrepreneurs building businesses in competitive markets?

How you allocate your stock portfolio is up to you and your advisor to figure out but these numbers should give you food for thought. For me it is more evidence that the center of gravity is clearly shifting to the Pacific Rim. By Pacific Rim I mean Asia, Australia and New Zealand but also the other side of the Pacific: Canada, Mexico, Chile, Panama, and America.

But more important than what countries you invest in is the stocks you pick. In my research on how billionaire tycoons invest, I noticed the following characteristics in their stock investments:

  • home court advantage & protected markets
  • allied with blue chip companies
  • local inside knowledge in booming consumer markets
  • lower costs and economies of scale
  • strong balance sheets and off the radar screen of Wall Street

In the coming weeks I will share with you some of these picks so you can learn how to invest like a tycoon.

Meanwhile, let me leave you with a quote from John Train’s Preserving Capital:

Be an adventurer; like the American of a century ago, not his clerkish descendant of today. You must think as a builder, a conqueror.

Opportunity awaits,

Carl Delfeld.

 

Bookmark and Share facebook twitter twitter

Leave a Comment


*