Asia-Pacific now boasts the largest population of high-net-worth individuals (HNWIs) of any region worldwide at 3.37 million, although North America still has the most wealth overall.
This region saw a 1.6% rise in its HNWI population last year, according to the World Wealth Report 2012, published by consultancy Capgemini and RBC Wealth Management. It comes after Asia-Pacific overtook Europe in the No2 spot by wealthy population in last year’s report.
But while the global HNWI population rose a marginal 0.8% to 11 million, total wealth declined -1.7% to $42 trillion – the first time such a divergence has occurred in the report’s 16-year history.
This drop in wealth, seen in every region except the Middle East (+0.7%), was attributed to declines in market cap – a key driver of HNWI population and wealth – amid an uncertain economic environment in which global GDP growth sank to 2.7%, from 4.1% in 2010.
Last year the world was beset by Europe’s debt woes – with the exception of smaller markets such as sub-Saharan Africa and Eastern Europe – while Asia-Pacific was hit by slowing demand from western Europe, disasters in Japan, a high oil price and elevated risk aversion.
While Asia-Pacific passed North America in terms of HNWI population, the latter still has the largest level of wealth at $11.4 trillion, followed by Asia-Pac with $10.7 trillion.
But the drop in North American wealth was the steepest at -2.3% outside of Latin America (-2.9%), driven in particular by losses in the ultra-high-net-worth population, who are invested in more high-risk, low-liquidity assets.
The report notes that while the $1-$5 million wealth bracket accounts for 90% of the overall wealthy population, the remainder – $5-$30 million and $30 million and above – accounts for 56.9% of total wealth. Moreover, the top 1% control 36% of wealth.
It is noticeable that Asia-Pac’s largest markets for HNWIs, Japan and China, both saw wealthy population growth last year, while India was knocked out of 12th position by South Korea.
As an outlier not in the top 12, Hong Kong saw the biggest year-on-year drop in HNWI population at -17.4% to 83,600. Behind this was a -16.7% drop in market cap and a -29.6% decline in national savings as a percentage of GDP.
Andrew Turczyniak, head of RBC Wealth Management for Asia, points to the fact that Hong Kong’s HNWI population tends to invest in equities and real estate. He stresses that, if anything, 2011 exposed as a fallacy the theory of Asia decoupling from the rest of the world.
Something similar was seen in Singapore, too, where the HNWI population fell -7.8% to 91,200 on the back of a -7.6% drop in market cap as inflation hit a 25-month high at 5.5%.
In terms of appetite among Asia-Pacific investors, 2011 saw greater risk aversion among HNWIs (as opposed to UHNWIs) as they flocked in particular to fixed income. This search for capital preservation above all has challenged the business models of wealth management firms.
In the UHNWI segment, Turczyniak says he has seen a return in appetite for collectables. “In places like China, where investing has been largely onshore, you are now seeing investments going into wine, stamps and jewellery,” he notes.
“All the auction houses are moving out to Hong Kong and China. You are starting to see some of these alternative assets become part of their portfolios.”
Just last month Capgemini and RBC Wealth Management announced a partnership to produce the World Wealth Report, with the latter taking over from Bank of America-Merrill Lynch. They are due to publish the Asia-Pacific Wealth Report in August or September this year.