Billionaire wealth creation to taper off


Wed, May 27, 2015 - Page 15

The rapid rate of wealth creation by billionaire entrepreneurs will probably level off over the next two decades as economic growth slows in emerging markets and governments act against income inequality, a study has found.

“Just as economies grow in cycles, so the opportunities that led to this most recent exceptional period of wealth generation are likely to end,” the report from UBS Group AG and PricewaterhouseCoopers (PwC) released yesterday said.

“Tax, social equality initiatives, asset price deflation and geopolitical tensions [such as civil wars] will likely have significant consequences for great wealth creation,” it said.

UBS, the world’s largest manager of money for the rich, and PwC found that 917 self-made billionaires accumulated US$3.6 trillion in the past 20 years.

The authors compared the period straddling the end of the 20th century with the “gilded age,” when a few businessmen built fortunes from cars, steel and electricity 100 years earlier.

Most growth in recent years occurred in the US, where fortunes were made in finance and technology, and Asia, where the consumer industry and real estate pushed the number of billionaires in the region past Europe.

Since 1995, the proportion of billionaires’ total wealth held by entrepreneurs increased to two-thirds from less than half, according to the study, which focused on the 14 richest billionaire markets.

However, the fact that two-thirds of billionaires are nearing the age when they will have to transfer their fortunes to the next generation might act as a brake on wealth creation, the study said.

What the majority of billionaires who are more than 60 years old choose to do with their wealth is crucial, “as fortunes will quickly dilute without a sensible preservation strategy and governance,” the report said.

Apart from being coveted clients for banks, many of the self-made billionaires covered by the report work in financial services. In the US, 30 percent of self-made billionaires come from the financial industry, compared with 27.3 percent from the field of technology.

However, technology billionaires are richer, with fortunes averaging US$7.8 billion, compared with US$4.5 billion for financiers, the study found.

By contrast, half of Europe’s and 20 percent of Asia’s self-made billionaires built their fortunes in the consumer industry in the past two decades.