High net worth individuals’ wealth to top US$100 trillion by 2025

29 September 2017   Category: News, Asia, Global, Hong Kong, USA, Europe, France, United Kingdom   By Asia Asset Management

The global wealth of high net worth individuals (HNWIs) rose to a record high US$63.5 trillion in 2016, driven by the benchmark-beating performance of their investments, and is expected to top $100 trillion by 2025, according to Paris-based consultancy Capgemini.

Last year’s figure represents an 8.2% increase from $58.7 trillion in 2015. 

The greater wealth fuelled by investment gains helped to swell the ranks of HNWI globally to an all-time high of 16.5 million in 2016, up 7.5% from the prior year, Capgemini says.

It forecasts global HNWI wealth to grow 6.1% annually over ten years from 2015, to exceed the $100 trillion mark by 2025.

The figures are from Capgemini’s new study, World Wealth Report 2017, which defines HNWIs as those with investable assets of at least $1 million, excluding their primary residence, collectibles, consumables, and consumer durables.

“The growth (in wealth) was mainly led by three regions: North America, Asia Pacific, and Europe,” David Wilson, head of Asia wealth management at Capgemini Global Financial Services, said at a press conference held to launch the report in Hong Kong on September 28.

The growth of HNWI wealth and population in Asia Pacific (APAC) decelerated last year. Their wealth grew 8.2% to $18.8 trillion, slowing from 10.12% in 2015. The ranks of HNWI in the region grew 7.4% to 5.5 million, slowing from 8.5%, previously.

“APAC was the only region that recorded deceleration last year although 8.2% [increase in HNWI wealth] was still a very good performance when considering how far it came over the past decade,” Mr. Wilson says.

HNWIs in APAC saw an investment return of 33% in 2016, well above the global average of 24.3%. That said, the global average still outperformed the 9.9% return of the benchmark S&P 500 last year, he notes.  

According to Mr. Wilson, equities were the “biggest driver” for the outperformance.

“HNWIs boosted their allocations toward equities and cash at the expense of alternative investment and real estate last year as they sought to maximise investment opportunities and avoid losses,” he says. 

The equities holdings in their portfolios were at a five-year high of 31.1% last year, up from 24.8% in 2015. Meanwhile, HNWIs in APAC ex Japan further increased their allocations to equities by 6.3 percentage points to 31.5% between the first quarter of 2016 and the second quarter of 2017, he adds.

He says APAC HNWIs are looking abroad to safeguard their wealth because of uncertain economic and political environments, with HNWIs in Hong Kong, China and Singapore allocating more of their wealth outside their home markets.

“Hong Kong and Singapore are the largest offshore markets for HNWIs in the region, closely followed by New York and London,” Mr. Wilson says.