labels: economy - general
Millionaires bloom as markets boomnews
21 June 2006

The number of high net worth individuals (HNWI) in India saw a 19 per cent increase in 2005 amidst a spectacular increase in individual wealth in developing countries, according to the World Wealth Report published jointly by investment bank Merrill Lynch and consultancy firm Capgemini. The number of high net-worth individuals rose 21 per cent in South Korea and 17 per cent in Russia over the past year, the report published on Tuesday said.

Worldwide the number of HNWIs rose 6.5 per cent to 8.7 million while their wealth grew eight per cent to $33 trillion over the period, the report said. In Asia Pacific, the HNWI population swelled to 2.4 million in 2005 — a 7.3 per cent increase from the year before. These HNWIs'' combined wealth increased eight per cent to $7.6 trillion. The growth of the super-rich with huge incomes and rising capacity to spend is more dramatic in the developing economies, the report pointed out.

The number of `ultra high net-worth individuals'' - those having financial assets of over $30 million — saw an even more dramatic rise of 10 per cent at 85,400 worldwide. Together, they represent one per cent of the richest and control 24 per cent of global wealth, the report said.

The world''s wealthiest were also able to get more for their money as the cost of luxury items has not kept pace with the increase in wealth, the report pointed out.

Asia is home to some of the fastest-growing markets in terms of HNWI population, occupying five out of the top 10 spots. The HNWI population also grew dramatically in Indonesia, where it rose 14.7 per cent; Hong Kong growing by 14.4 per cent, and Singapore, where it increased by 13.4 per cent. Significant growth was also recorded in South Africa, Saudi Arabia, United Arab Emirates and Brazil.

The number of millionaires in the United Arab Emirates rose to 59,000 in the aftermath of the oil boom and the stock market surge, the report said. However, the report expects a fall in the number of millionaires in 2006 as the stock markets are on decline in both the UAE and Saudi Arabia.

In the UK, the growth in the number of HNWIs was a modest seven per cent to just under 450,000, against nearly nine per cent in 2004. However, the rise in the number of millionaires in the UK was above the rate of GDP growth and compared well with that of other EU countries like France and Germany.

Europe saw a 4.5 per cent overall increase in the number of HNWIs, compared with 6.8 per cent in the US. Despite a generally slow GDP growth in eastern Europe, countries such as the Czech Republic, Hungary and Poland saw sharp increases in the number of wealthy individuals.

"Market returns and economic indicators signaled that the creation of wealth was slowing somewhat in many regions of the world - most notably, North America - but HNWIs were still able to benefit from pockets of high performance last year," Robert McCann, vice chairman and president of Merrill Lynch''s Global Private Client Group, said.

In 2005, Asia Pacific surpassed Europe as the second most popular destination for HNWI investments, accounting for 23 per cent of their total assets.

Although North America remains the world''s most popular region for investment, HNWIs continue to shift investments away from that region. In 2004, HNWIs showed a decided lack of confidence in the US. dollar and reduced their North American investments accordingly. Even though the dollar bounced back somewhat in 2005, investors trimmed their North American allocations because of low returns. Despite being outpaced by the Asia Pacific region last year, Europe retained 22 per cent of HNWIs'' worldwide assets. Strong performance by Europe''s mature capital markets coupled with strong advances in its emerging markets, persuaded local HNWIs to increase their allocation to domestic markets to 48 per cent, up from 40 per cent in 2004.

In response to particularly strong regional stock market performance in the Asia Pacific region in 2005, Asian HNWIs fine-tuned portfolio allocations in favor of equities and cash/deposits. Asian HNWIs boosted their allocation to equities by two percentage points, to 24 per cent. These moves were made at the expense of real estate and alternative investments.

  • Global financial services model needed to better-assist next generation of high net worth individuals Contrary to the "think globally, act locally" mindset, HNWIs are increasingly both thinking and acting globally, as they steadily look beyond traditional domestic markets to explore investment opportunities in new and emerging economies around the world. "Global HNWIs are increasingly showing a preference for international investments and lifestyles, which will intensify as an unprecedented amount of wealth is passed on to a new generation of globally-minded investors," said Rajan Sehgal, director and NRI market leader, Merrill Lynch''s ''global private client group. "In order for financial advisors to meet the demands of global-minded clients and to gain market share, the ability to tap several markets with a consolidated global service model is critical." He added "advisors offering global solutions will likely gain clients while also helping to eliminate the risk of assets being moved to other firms." Driven by the expectation of better returns and mitigating risks, HNWIs are becoming more aware of wealth management opportunities and strategies abroad. In fact, 65 per cent of HNWI relationship managers surveyed said their clients are increasingly aware of how wealth is managed internationally. In addition to investing globally, nearly three out of 10 HNWIs are buying homes in different countries. Having an overseas address is especially popular among investors in the Middle East and Europe, where 80 per cent and 40 per cent, respectively, of HNWIs own a home in another country. "The new HNWIs are truly citizens of the world, who not only demand more access to a complete ''family balance sheet'' view of their asset information and data, but also want strategic, global advice about the next opportunity," said Bertrand Lavayssière, managing director, global financial services, Capgemini.
  • As international lifestyles become increasingly common, those managing wealth strain to meet new service demands Globally, the Report finds that HNWIs were more aggressive in allocating their assets last year than in 2004, though they remained well diversified to maximise investment protection. HNWIs increased investments in equities and alternative vehicles and, anticipating higher bond rates in the future, shifted funds from fixed-income and cash / deposits. Globally, funds allocated to private equity rose, while hedge funds - which have seen steady declines in returns in the last two years - lost favor among HNWIs. "We''re seeing an increasing number of HNWIs adopt the strategies of Ultra-HNWIs and begin to rebalance their portfolios to increase their exposure to international investments as those markets continue to deliver higher returns and uncertainty prevails around the dollar. This is particularly evident in investment increases by HNWIs in Asian Markets," said Bertrand Lavayssière, managing director, global financial services, Capgemini.
  • Real estate continued to deliver last l; cool-down expected Despite rising interest rates and fears of a downturn in the sector, real estate continued to provide strong returns for HNWIs throughout 2005. Although the gains were markedly lower than those made in 2004, HNWIs held onto their real estate investments in 2005. Based on interviews with HNWIs and relationship managers from multiple institutions it is anticipated that HNWIs will begin to reduce their real estate allocations in 2006.
  • Looking ahead The report research suggests that HNWIs will continue to transfer assets away from mature markets and into emerging markets for the foreseeable future. It is also expected that their investments in North America and Europe will continue to decline over the next few years as HNWIs reallocate funds to Asia Pacific and Latin America. Findings show that in terms of asset mix, HNWIs are likely to continue to embrace a slightly more aggressive portfolio, decreasing their cash/deposit and real estate positions and moving funds to equities and alternative investments. The total wealth for HNWIs is forecast to increase to $44.6 trillion by 2010, based on average annual growth of 6.0 percent, according to the Report. "HNWIs'' heightened interest in international investments, along with their growing exposure to equities and alternative investments, are clear signs that the world''s wealthiest individuals are not only becoming more sophisticated investors, they also are more determined than ever to achieve returns comparable to those experienced in 2003 and 2004," said Lavayssière.

 search domain-b
Millionaires bloom as markets boom