Despite the fact that the world's gross domestic product shrank last year, high-net-worth individuals managed to almost make up for 2008 losses, according to the Merrill Lynch Global Wealth Management and Capgemini 14th annual World Wealth Report.
The number of high-net-worth individuals globally, which includes anyone with more than $1 million of investable assets, returned to the 10 million mark last year and their wealth soared 18.9% to $39 trillion. Ultra-high-net-worth individuals, with investable assets of at least $30 million, increased their wealth by 21.5% last year.
How did the rich do it? By investing in emerging markets.
“The rebound has been, and will continue to be, driven by emerging markets-especially India and China, as well as Brazil,” said Bertrand Lavayssiere, a managing director of global financial services at Capgemini. “In fact, Asia-Pacific was the only region in which both macroeconomic and market drivers of wealth expanded significantly in 2009.”
Because of their aversion to risk, high net worth individuals reduced their holdings in cash and deposits and increased their holdings in bonds after the financial crisis. But by 2011 high-net-worth individuals will allocate 6% more to equities as investors gain confidence, said Lyle LaMothe, head of U.S. wealth management for Merrill Lynch Global Wealth Management, at a breakfast meeting in New York City Tuesday. “Asia-Pacific will likely be the powerhouse of high net worth growth for years to come, led by China,” he added.
Meanwhile, most of the world’s high net worth individuals were highly concentrated in the United States, Japan and Germany, accounting for a total of 53.5% of the high-net-worth population last year, down from 54% in 2008.
North America still has the largest cluster, with 3.1 million high net worth individuals accounting for 31% of the global population of high-net-worth-individuals.
“The last few years have been significant for wealthy investors,” Sally Krawcheck, the president of global wealth and investment management at Bank of America, said in a press release. “While in 2008 global HNWI wealth showed an unprecedented decline, a year later we are already seeing distinct signs of recovery, and in some areas a complete return to 2007 levels of wealth and growth.”
The key to growth for the rich has been that millionaires invested more of their money overseas last year. High-net-worth individuals in all regions except Latin America increased their relative share of holdings in markets outside their home regions last year, according to the report, which could be a sign that investors are pouring more money into emerging markets where more growth is expected.
This trend is expected to continue. By 2011, high-net-worth individuals are forecasted to shift more money overseas, with millionaires in North America and Europe expected to increase allocations in the Asia-Pacific region.