High net worth individuals (HNWI) population and wealth grew in 2013
Asia Pacific may surpass the U.S. in 2015 in both number and wealth of HNWI, according to Capgemini Financial Services. The firm estimates that the region’s HNWI population will grow 9.8% annually. It could surpass the U.S. in number of HNWI by 2014 and in HNWI wealth by 2015.
Nearly 2 million individuals became millionaires in 2013. Asia Pacific’s HNWI population rose by 17.3% and now trails North America only by 10,000 individuals. The majority of HNWI population growth took place in the countries with the highest HNWI concentration, which are the U.S., Japan, Germany and China. The majority of the global HNWI population lives in these four countries. Their share of HNWI has risen from 58.4% in 2012 to 59.9% in 2013.
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Wealth has grown at a 9.9% annual clip since 2008. In 2013, Asia Pacific led with an 18.2% increase in wealth followed by North America. Within Asia Pacific, Japan experienced the fastest HNWI population growth at 22.3% in 2013. Such growth was a surge from Japan’s HNWI 4.6% annual growth rate posted from 2007 to 2012. Optimism and gains in real estate and stocks fueled wealth in Japan. The country’s fiscal stimulus program drove GDP from a contraction in 2011 to a 1.7% year over year increase in 2013.
Better economy and optimism drove interest in stocks and alternatives
Globally, stocks were the second most held asset class followed by cash in the first quarter of 2014. Cash holdings decreased by 1.6% relative to 2013 to 26.6%. Stocks also fell slightly by 1.2% to 24.8% of HNWI financial assets. Fixed income and alternative investments improved relative to 2013 growing by 0.7% and 3.4%, respectively.
All regions except for Latin America invested more in alternative investments. Latin Americans were more risk averse after their local equity markets plunged by 15.7% led by an 18.7% decline from Brazil. Higher inflation, export declines and foreign capital contraction were headwinds in 2013. Latin American HNWI increased their allocation to fixed income and cash to cope with uncertainty.
Within alternative investments, HNWI allocated more to hedge funds and foreign exchange last year. Hedge fund allocations improved by 3.5% led by North America. Foreign exchange is the third most used alternative investment with a HNWI share of 18.4%. Its allocation also improved by 1.1% globally, with most growth registered in North America. Japan has the largest allocation to foreign exchange, accounting for 33.6% of its alternative portfolio.