The ultra-wealthy are still pretty risk averse, according to a recent survey by the Institute for Private Investors, a membership organization for ultra-high-net worth individuals and families. But they may begin increasing allocations to global emerging markets and reducing cash in 2011.

The December survey of 72 IPI members, who have a mean net worth of $100 million, revealed that they believe their own portfolios underperformed the S&P 500’s 15 percent return for the year by about a third. But the funny thing is, they weren’t upset about it, said IPI president Kristi Kuechler.

“I heard over and over again that members were fine with reduced risk and giving up returns,” Kuechler said. “They wanted to feel like they were more in control of their investments and were reducing their expectations.”

Kuechler said she thinks some level of risk aversion and lowered expectations will continue this year among IPI members. “Investors seem to still have reluctance about going out on the risk spectrum,” she said. “There are still a fair number of people who are skeptical of a continued linear market rise.”

Wealth managers say their clients have expressed similar sentiments. “We’re very definitely seeing what the IPI survey shows,” said Stephen Prostano, president and chief operating officer for Boston-based Silver Bridge Advisors. “We have been moving towards goals-based investing and clients do not want to take risk at the expense of capital they need to maintain their lifestyle.”

Matt Cooper, president, private client services for Beacon Pointe Advisors of Newport Beach, Ca. agreed. “The wounds from 2008 are still very raw,” Cooper said. “I think people are seeing that the downside losses in a portfolio are always more important than the upside. And as baby boomers near retirement they see that cash outflows from the portfolio exaggerate the downside, making them more cautious.”

Global Investments Viewed Favorably

And yet, growing interest in global investments by the wealthy suggests the ultra high-net-worth may be willing to be a little bit more adventurous in 2011. Nearly two-thirds of IPI members surveyed said they plan to increase allocations to global long-only equity.

“It’s a sign that things may be shifting, although it’s too early to tell,” Kuechler said. “If you invest in long-only global, you’re going to have to accept a lot of ups and downs.”

According to Eric Bennett, chairman and chief executive of Dallas-based Tolleson Wealth Management, many wealthy investors are enthusiastic about investing abroad because they’ve seen the growth in emerging markets with their own eyes.

“We’re seeing a lot of interest in overseas investment,” Bennett said. “People who come back from countries like China, India and Brazil see what’s going on there and talk about it. I think South American countries will be getting more attention because there are more democracies there.”

Another sign that wealthy investors may be less conservative this year is the IPI survey’s finding that slightly over a third of surveyed members expect to reduce their allocation to cash.

But Kuechler said the “reservoir of skepticism” among very wealthy investors remains high. “They are very skeptical about whether the recovery will last,” she said, noting that the theme of the organization’s upcoming winter forum in San Francisco next month is “Bubble, Bubble, Toil and Trouble.”

Wealth managers around the country echoed those sentiments.

“There is an overhang of concern,” Bennett said. “Clients are concerned about how there can be sustainable growth without job creation and a recovery in housing prices.”

Apprehension that the economy may slump without continued stimulus was also pervasive, wealth managers said.

“People are afraid that growth will stop if the Federal Reserve Board takes its foot off the gas pedal,” said Adrian Cronje, chief investment officer at Atlanta-based investment advisory firm Balentine. “At the end of the day, private sector expectations and confidence are more important than government actions for a self-sustained recovery.”