The wealth of high net worth individuals (HNWI) in the Middle East rose the most in 2011 compared with millionaires in other regions of the world, a new report has revealed.
According to the Capgemini RBC World Wealth Report 2012, the combined wealth of 450,000 Middle East millionaires rose 0.7 per cent in 2011 over 2010 to reach $1.7 trillion.
In comparison, the world’s millionaires lost 1.7 per cent of their wealth on an average, with the Middle East being the only region where millionaires saw their wealth grow, according to the report.
Globally, the millionaires hold a massive $42 trillion in investable wealth, according the report, which defines a HNWI as someone whose combined assets of money, funds, property, jewellery and arts are worth at least $1 million.
The number of millionaires in the Middle East grew 2.7 per cent in 2011, compared with an anaemic 0.8 per cent global average. However, the Middle East’s growth in the number of HNWIs was overshadowed by Latin America (5.9 per cent growth in the number of millionaires last year) and Africa (3.9 per cent).
But despite world beating growth in the number of millionaires it houses, Latin American millionaires’ total wealth declined 2.9 per cent last year – the biggest decline among all regions of the world, followed by North America, which saw millionaire wealth go down by 2.3 per cent, Africa (-2 per cent), and Europe and Asia-Pacific regions (-1.1 per cent each).
As mentioned earlier, the Middle East was the only region to witness a growth in wealth of its millionaire population.
“The aggregate decline in investable HNWI wealth in 2011, despite the growing number of HNWIs, reflected the disproportionate impact of performance in the upper wealth bands, which experienced larger-than-average losses in both numbers and wealth,” the report said.
The world also saw a drop in the number of ultra-wealthy (defined by the report as someone with at least $30 million in investable wealth) in 2011. “The global population of Ultra-HNWIs declined 2.5 per cent to 100,000 in 2011, and their wealth declined by 4.9 per cent, after gaining 11.5 per cent in 2010,” it stated.
“The number of mid-tier millionaires [those with $5m to $30m in investible wealth] declined 1 per cent to 970,000, and their wealth by 1.2 per cent. These two segments account for just 9.7 per cent of the global HNWI population, but 56.9 per cent of its investable wealth,” the Capgemini report said.
“Investors in these upper wealth bands are more likely to have committed at least some of their investments to higher-risk and/or less-liquid assets such as hedge funds, private equity, or commercial real estate. There is potential for greater returns in such assets, but they can also be hard to divest at a palatable price in a viable time frame, so many such investments remained in UHNW portfolios, losing value quickly in the type of volatile markets seen in 2011,” it added.
India and Hong Kong topped the list of countries losing HNWIs in 2011. Equity-market capitalisation plunged in India in 2011, wiping out asset values and levels of investable wealth. This helped to reduce the size of the country’s HNWI population by 18 per cent, according to Capgemini. A similar stock-market decline in Hong Kong (where HNWIs are traditionally highly exposed to equities) helped to reduce that HNWI population by 17.4 per cent.
For the first time, however, millionaires in the Asia-Pacific region outnumber those in North America, a sign of shifting wealth from west to the east. “Asia-Pacific is now home to slightly more HNWIs than any other region, though North American HNWIs still account for the largest regional share of HNWI wealth,” the report shows.
“The number of Asia-Pacific HNWIs hit 3.37 million in 2011, compared to 3.35 million in North America, and 3.17 million in Europe. In terms of assets, HNWIs’ investable wealth totalled $11.4 trillion in North America, down 2.3 per cent from 2010, and was $10.7 trillion in Asia-Pacific, down 1.1 per cent.
“Among Europe’s HNWIs, wealth was down 1.1 per cent in 2011 at $10.1 trillion. In Latin America, HNWI wealth declined 2.9 per cent, though the HNWI population grew modestly, by 5.4 per cent.”
The bulk of the world’s millionaire population remains concentrated in the US, Japan, and Germany. Together, the three countries accounted for 53.3 per cent of the world’s millionaires in 2011, up slightly from 53.1 per cent in 2010.Beyond the top three, there was little change in the geographic distribution of the world’s millionaires although the loss of millionaires in India was enough to push it from the Top 12, and it was replaced by South Korea.