According to a study released on Tuesday, faster-growing Asia surpassed North America in terms of number of millionaires.
Capgemini and RBC Wealth Management’s latest world wealth report said the global personal wealth of people with $1 million and more to invest fell in 2011 for the second time in four years, as a result of the euro zone crisis and economic deterioration in Western markets. The report added that several emerging markets also felt pain, as the number of millionaires in India and Hong Kong fell by almost one-fifth.
It also warned that the outlook for wealth creation in 2012 remains dim given that Europe is facing unprecedented debt crisis.
According to the report, the world’s population of millionaires grew by 0.8% to a record 11 million. However, their collective wealth fell by 1.7% to $42 trillion. The Middle East is the only region in the world that did not witness substantial declines in wealth. It was the first global drop in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell by 15% and their wealth contracted by 20%.
The findings suggest that families with $30 million or more to invest saw their combined wealth fall 4.9% and their ranks shrink by 2.5% to 100,000 people. This decrease reflects their holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.
Many countries suffered from sinking stocks, slowing exports and slumping currencies, especially India, which saw its ranks of millionaires fall by 27,500, or 18% to 125,500 last year, reflecting a one-third decline in stock market values and a weakening rupee. Hong Kong’s millionaire population fell by 17.4% as euro zone contagion shadowed its own growth.
According to Capgemini, last year was the first time India’s wealthy declined in population since 2008, when their ranks fell by 32% amid falling stock prices and lower global demand for goods and services.
“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said in an interview.
The Toronto-based banking giant, one of the world’s 10 largest wealth managers, took over sponsorship of the widely watched report last month from Bank of America’s US brokerage unit Merrill Lynch.
Lewis noted the number of high net worth individuals rose even as overall wealth decreased.
“It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.
“The economic slowdown, some debt challenges and indices that dropped 30 percent in 2011 were major factors that drove the decline in India,” William Sullivan, global head of market intelligence at Capgemini, said at a New York press briefing Tuesday.
Surprisingly, Europe increased its millionaire ranks by 1.1% last year, for a total of 3.2 million, while combined wealth fell 1.1 percent to $10.1 trillion. The report also said Europeans invest more of their wealth overseas, reducing their exposure to domestic markets.
The outlier in terms of wealth was the Middle East, where civil unrest that shook up equity markets worldwide led to surging oil prices and 3.1% economic growth. The region’s millionaire ranks rose 2.7% to 450,000, and that group increased its wealth by 0.7% to $1.7 trillion.
The report cautioned that 2012 so far has remained challenging for investors. Concerns about China’s growth rate, signs of further contraction in mature markets and the uncertainty stemming from elections and financial policy decisions also may weigh on 2012 performance, he said.
“Repeated flare-ups are likely to keep markets on edge,” said Jean Lassignardie, a vice president at Capgemini Global Financial Services.
The report, now in its 16th year, does not delve into asset-allocation decisions made by wealthy investors as it has in the past, because that data was based on interviews with Merrill Lynch advisers.
Merrill Lynch, the original bank sponsor of the survey, is in talks to sell its non-US wealth management business with Geneva’s Julius Baer Gruppe AG, people familiar with the situation told Reuters Tuesday.