The Knight Frank Wealth Report provides an insight into the world of the super rich and their choices. It highlights global property investment opportunities while also showing that education is incredibly important to ultra-high net-worth individuals or UHNWIs, with the number of children being sent overseas for their schooling increasing year on year. There is also a highlight on the distribution of the world’s population of demi-billionaires – those with over US$500 million in net assets — and finds that Asia is leading the way
In four years’ time, there will be more demi-billionaires in Asia than in North America. Wealth data specialist Wealth-X predicts that there will be almost 3,000 people based in Asia who have more than US$500 million in assets by 2022, echoing one of the key themes from The Wealth Report – the increasing power of Asia as a wealth hub.
Strong global economic growth as well as rising asset prices will boost the number of demi-billionaires worldwide to 9,570 in 2022, up from 6,900 at the end of 2017. But, despite Asia’s growth, the US will remain the country with the biggest overall population of demi-billionaires, expected to rise from 1,830 to nearly 2,500 by 2022. In China, the number will climb from 490 to 990, Wealth-X predicts.
The path so far in 2018 has not been smooth, with increasingly tense discussions on trade between the US and China, political uncertainty in the UK and some parts of the EU and interest rates either already rising or set to do so.
Nevertheless, the global economy continues to grow strongly, with the IMF forecasting 3.9 per cent growth this year and next, up from 3.8 per cent in 2017 and 3.2 per cent in 2016. The Economist Intelligence Unit summed up the situation in a recent report: “There has arguably never been a greater disconnect between the apparent strength of the global economy and the magnitude of geopolitical, financial and operational risks that organisations are facing.”
Certainly many stock markets are performing strongly. While there was a turbulent start to the year in the UK and Europe, markets have now regained the highs seen at the end of 2017. In the US, the stock market continues its bull run. So what does all this mean for ultra-high net-worth individuals or UHNWIs?
“There has been a stabilisation in the growth of ultra-wealthy individuals,” says Winston Chesterfield, Director of Custom Research at Wealth-X. “Market volatility has decreased, and the equity and bond performance seen in 2017 has created a sense of confidence. This has augmented the trend towards more entrepreneurial spending among the ultra-wealthy, especially in emerging economies.
“It is too early to say how UHNWIs will react to the political events of 2018 so far – but our data show that they tend to take a longer view. The vast majority of UHNWIs are entrepreneurs and, as such, have dealt with adverse business conditions before. As a result, they are prepared to take a more balanced view in periods of uncertainty or ambiguity.”
Money on the move
One of the critical issues in The Wealth Report is where money is coming from – and where it’s going to. These movements help to drive both residential and commercial property market performance globally. This is done by using data collected by the Bank for International Settlements (BIS). The 2018 edition of The Wealth Report provides an analysis of BIS data on the level of deposits from individuals, corporates and governments by
location of origin. The number of locations that report to the BIS on an aggregate level has risen to 31, while those reporting on a location-by-location basis has risen to 29, helping to provide a more comprehensive overview.
The level of deposits held overseas around the world is increasing. The total level of cross-border deposits reported at December 2017 was US$6.4 trillion, US$632 billion higher than was reported in December 2016.
Despite the rise in political uncertainty and unknowns surrounding Brexit, the UK saw the largest inflow of overseas deposits by some margin. The level of deposits reported rose to US$1.8 trillion in December 2017, a currency-adjusted annual net inflow of US$239 billion.
The second most popular destination was France, with an annual adjusted net inflow of US$89 billion. This influx could be partly attributed to the popularity of Macron’s government at the end of 2017, restoring faith in the French economy. Taiwan maintained its position, coming in third with an annual net inflow of US$12 billion, a fact that can be attributed at least in part to its being outside the remit of the CRS.
The country that saw the largest increase of deposits held outside its borders was the US. Over the course of 2017, it was the largest origin for deposit outflows, depositing an additional US$220 billion across the reporting locations. The most popular destinations for these funds were the UK, France and Canada. Hong Kong was also a significant source of funds, adding US$40 billion to the deposits held in other reporting locations over 2017, the biggest recipients being the UK, Macau and the US.