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Developing countries are experiencing a rapid emergence of a new elite of super-rich individuals as their economies expand and mature.
A report published shows that the number of “high net-worth individuals” (HNWI) increased by 21 per cent in South Korea, 19 per cent in India and 17 per cent in Russia over the past year. These dramatic increases in individual wealth were largely as a result of booming stock markets – the Dow Jones South Korea Index gained 55 per cent in 2005, for example.
The World Wealth Report, published annually by the investment bank Merrill Lynch and the consultancy firm Capgemini, examines the growth and spread of individuals around the world who have liquid assets of more than $1 million, excluding their primary residence and consumables. At the end of 2005, it said, there were 8.7 million HNWIs worldwide – 6.5 per cent more than a year before. Their wealth had grown by eight per cent to $33 trillion.
There was an even bigger jump in the number of “ultra high net-worth individuals” – those with financial assets of more than $30 million. This exclusive club now has 85,400 members worldwide, an increase of more than 10 per cent. Together, these individuals, who represent one per cent of the richest one per cent in the world, control 24 per cent of global wealth.
The report suggests that the world’s wealthiest are also able to get more for their money. What the report calls the “cost of living extremely well” – in effect, the cost of luxury items from jets and yachts to five-star hotel rooms and spa treatments – has not kept pace with the increase in wealth.
In Britain, the growth in the wealthy population was modest compared with the developing world. The number of HNWIs grew by seven per cent to just under 450,000, compared with a jump of nearly nine per cent in 2004. The authors of the report say this was probably because of a slowdown in the growth of the UK’s gross domestic product (GDP) and a weaker stock market performance.
However, the rise in the number of rich individuals in Britain remained above the rate of GDP growth and compared well with that of other western European countries, such as France and Germany, reflecting the attractiveness of the UK as a home for the European rich. Overall in Europe, there was a 4.5 per cent increase in the number of HNWIs, compared with 6.8 per cent in the US. Despite slowing GDP growth, eastern European countries, such as the Czech Republic, Hungary and Poland, also saw sharp increases in the number of HNWIs on the back of surges in the values of stocks in those countries.
The report also suggests the world’s super-rich are starting to move their money out of the United States. Although it remains the world’s most popular region for investment, an increasing number of HNWIs are transferring assets to emerging markets such as Asia-Pacific and Latin America. There was also a shift away from hedge funds to “alternative investments”, in particular private equity, which is now more popular than at any time since the dotcom boom.
Jason McLean, one of the report’s authors, said: “The world’s wealthiest individuals are not only becoming more sophisticated investors, they are also more determined than ever to achieve returns comparable to those experienced in 2003 and 2004.”
· Hans Kundnani