Capgemini and Merrill Lynch Global Wealth Management released the 2009 World Wealth Report yesterday. The 13th edition of the report provides a statistical snapshot of the world's wealthy.
For definitional purposes, the report looks at high net worth individuals (HNWIs) being persons with investable assets between US$1-30 million and ultra high net worth individuals (UHNWI) being individuals with investable assets worth more than US$30 million.
Highlights from the report:
1. the number of HNWIs fell by 14.9%. Their wealth fell by 19.5%. There are now 8.6 million HNWIs globally;
2. UHNWIs were hit even harder, with numbers falling by 24.6% and wealth by 23.9%. There are now an estimated 78,000 UHNWIs globally;
3. the largest decline was experienced in Hong Kong, where the number of HNWIs fell a staggering 61.3% (at least in part a reflection on the size of the local stock market relative to both population and GDP);
4. there was a significant shift in asset values away from equities (which fell from 33% of total assets to 25%) and riskier exotic products to assets that were perceived as being safer - mainly towards cash (which rose from 17% of total assets to 21%), fixed interest, simple structured products and, to a lesser extent, real estate. Although not stated in the report, I suspect that at least some of the change in asset allocation was imposed by falling asset values in most asset classes (i.e. not all of the change was due to conscious decision making);
5. there was a noticeable shift in domestic preference with investors allocating more of their assets to domestic investments;
6. the amounts spent on collectibles and luxury items fell very significantly;
7. China overtook the UK to have the fourth highest number of HNWIs (the US, Japan and Germany remain the top three);
8. the only major asset classes which did not lose money for investors in 2008 were cash and treasuries (or equivalent). Everything else lost money (including hedge funds);
9. in addition to a shift to safer assets, there was also a shift to simpler assets. The amount invested in complex structured products increased but there was a noticeable increase in simple wealth preserving products and a decline in riskier and more complex products;
10. not only did HNWIs have 21% of their assets in cash or cash equivalents, nearly a fifth of that cash was held outside the banking system;
11. in spite of a fall in demand for luxury goods, the Forbes Cost of Living Extremely Well Index rose 12% - as usual this was well above the rate on inflation. This has been a persistent trend and goes a long way to explaining why a million dollars does not support anywhere near the lifestyle it used to.
There is a section of the report which discusses the wealth management industry which was of little interest to me (although I did note that there was a noticeable shift towards lower margin products - in effect investors became more fee sensitive).