The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Given that 2007 was a volatile year for financial markets worldwide, Victor Tan, Hong Kong market director at Merrill Lynch Global Wealth Management, considers the growth impressive. ThatÆs still lower than the 11.4% growth in HNWI assets to $37.2 trillion last year, however.
Last yearÆs increase in HNWI assets reflects the impact on individual wealth of global economic growth and higher financial market capitalisation, especially in emerging markets. Merrill Lynch considers as HNWIs those with net assets of at least $1 million (excluding primary residences and consumables) and ultra HNWIs those with net assets of at least $30 million.
North America still has the largest HNWI assets at $11.7 trillion, followed by Europe at $10.6 trillion, Asia-Pacific at $9.5 trillion, Latin America at $6.2 trillion, the Middle East at $1.7 trillion, and Africa at $1 trillion. Growth-wise, Latin America, the Middle East and Africa led the way last year.
Looking ahead, Merrill Lynch expects the combined wealth of HNWIs to reach $59.1 trillion by 2012, growing at an annual rate of 7.7%. The firm expects the Middle East, Latin America, and Africa to have the strongest growth in HNWI assets; growing at 15.3% to $3.4 million, 108% to $10.3 million, and 10.4% to $1.7 million, respectively. Assets of HNWI in Asia-Pacific are expected to rise 7.9% to $13.9 billion. Although North America is expected to still be the market with the largest HNWI assets, its growth is forecast at a mere 6.8%.
ôThese numbers are quite achievable in the next five years,ö Tan says. ôEven with the slowdown that we are seeing today, there is a tendency for markets to recover fairly quickly with the help of central banks and governments in generating growth.ö
Last year, the number of HNWI worldwide rose 6% to 10.1 million, while the number of ultra HNWI increased by 8.8%.
In Asia-Pacific, the HNWI population rose 8.7% to 2.8 million last year. The regionÆs HNWIs had combined wealth of $9.5 trillion, an increase of 12.5%.
Asia was home to some of the worldÆs fastest-growing markets by HNWI population, taking five spots out of the global top 10 for the third consecutive year. India was the worldÆs fastest-growing HNWI market with a 22.7 % gain to 123,000, followed by China with a 20.3% increase to 415,000. China also surpassed France as the fifth-largest HNWI population in the world. Others in Asia that were among the worldÆs fastest-growing HNWI markets were South Korea (+18.9% at 118,000), Indonesia (+16.8% at 23,000) and Singapore (+15.3% at 77,000). In Hong Kong, the number of HNWIs rose 10.2% to 95,000 last year.
ôIn the Asia-Pacific region, wealth is being created at an unprecedented rate,ö Tan says. ôNotwithstanding the recent dislocation in global markets, the robust economies in Asia are increasingly being driven by the domestic consumption story and continue to spur wealth creation in the region.ö
Stockmarkets in India, China and other emerging markets enjoyed strong performances last year. The market capitalisation of ChinaÆs Shanghai and Shenzhen Stock Exchanges surged 303% and 244%, respectively. IndiaÆs Bombay Exchange and National Stock Exchange had respective growth rates of 122% and 115%.
In terms of asset allocation, HNWIs shifted their assets to cash, deposits, and fixed-income securities. They trimmed their allocations to alternative investments and real estate. Domestic markets were favoured over overseas markets.
ôThey sought refuge in safer, more traditional investment vehicles due to market uncertainties,ö Tan says.
Meanwhile, despite rising costs and financial market uncertainty, HNWI still spent considerable amounts of their wealth on so-called ôpassionö investment such as fine art, luxury automobiles, private yachts, sports teams and jewellery.
ôLuxury goods makers, high-end services providers, and auction houses all found ready clients in the emerging markets of the world û most notably, China, India, Russia and the Middle East û thereby sustaining their own growth,ö says Bertrand Lavayssiere, managing director for global financial services at Capgemini.
Private jets, custom yachts, high-end automobiles and other luxury collectibles made up 16.2% of passion investments, making them the most popular choice among HNWIs worldwide. Fine art was the second-most popular investment at 15.9%, followed by jewellery at 13.8%. Capgemini could not provide the percentage of assets spent on these passion investments, however, in relation to the total assets of HNWIs.
In Asia-Pacific, the percentage of passion investments to jewellery, gems and watches was the highest at 19%, followed by luxury consumables at 15%, and luxury collectibles at 14%.
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