Developing countries are experiencing a rapid emergence of a new elite of super-rich individuals as their economies expand and mature.
A report published on Tuesday shows that the number of "high net-worth individuals" (HNWI) increased by 21 percent in South Korea, 19 percent in India and 17 percent in Russia over the past year. These dramatic increases in individual wealth were largely as a result of booming stock markets -- the Dow Jones South Korea Index gained 55 percent last year, for example.
The World Wealth Report, published annually by the investment bank Merrill Lynch and the consultancy firm Capgemini, examines the growth and spread of individuals around the world who have liquid assets of more than US$1 million, excluding their primary residence and consumables. At the end of last year, it said, there were 8.7 million HNWIs worldwide -- 6.5 percent more than a year before. Their wealth had grown by 8 percent to US$33 trillion.
There was an even bigger jump in the number of "ultra-high net-worth individuals" -- those with financial assets of more than US$30 million. This exclusive club now has 85,400 members worldwide, an increase of more than 10 percent. Together, these individuals, who represent 1 percent of the richest 1 percent in the world, control 24 percent of global wealth.
The report suggests that the world's wealthiest are also able to get more for their money. What the report calls the "cost of living extremely well" -- in effect, the cost of luxury items from jets and yachts to five-star hotel rooms and spa treatments -- has not kept pace with the increase in wealth.
In Britain, the growth in the wealthy population was modest compared with the developing world. The number of HNWIs grew by 7 percent to just under 450,000, compared with a jump of nearly 9 percent in 2004. The authors of the report say this was probably because of a slowdown in the growth of the UK's GDP and a weaker stock market performance.
However, the rise in the number of rich individuals in Britain remained above the rate of GDP growth and compared well with that of other western European countries, such as France and Germany, reflecting the attractiveness of the UK as a home for the European rich. Overall in Europe there was a 4.5 percent increase in the number of HNWIs, compared with 6.8 percent in the US. Despite slowing GDP growth, eastern European countries, such as the Czech Republic, Hungary and Poland, also saw sharp increases in the number of HNWIs on the back of surges in the values of stocks in those countries.
In Britain, the main source of the wealth was owning businesses or selling a business or stocks. In the US, by contrast, 32 percent of HNWIs' wealth was derived from income, compared with 13 percent in Europe. The authors of the report attribute the continued increase in the number of HNWIs in Britain last year to profits derived from the increase in oil prices. Some 18 percent of British HNWIs' wealth is inherited.
The report also suggests the world's super-rich are starting to move their money out of the US. Although it remains the world's most popular region for investment, an increasing number of HNWIs are transferring assets to emerging markets such as the Asia-Pacific and Latin America. There was also a shift away from hedge funds to "alternative investments," in particular private equity, which is now more popular than at any time since the dotcom boom.
Jason McLean, one of the report's authors, said: "The world's wealthiest individuals are not only becoming more sophisticated investors, they are also more determined than ever to achieve returns comparable to those experienced in 2003 and 2004."
The report also highlights an ongoing shift in the lifestyles of the world's richest people. As well as being spread around the globe, they are increasingly global in their tastes. For example, over a quarter have residences and financial advisers abroad and a fifth of them have children who live abroad. That shift presents a challenge to companies such as Merrill Lynch, which are having to create global teams to manage the wealth of individuals or families.
However, despite the continued growth in their numbers and wealth, the super-rich in the West are facing a crisis. As the baby-boomers, who make up a significant proportion of the world's wealthiest individuals, reach retirement age, they are having to work out how to pass on their wealth -- whether to the next generation of the family or though philanthropy -- without being hit by inheritance taxes.
According to the report, 61 percent of HNWIs around the world are over 56 years old, compared with just 15 percent of the world's population as a whole. This will soon create what the authors call "the largest wealth transfer in history."
"All HNWIs will have to review their inheritance plans," said Nick Tucker, the head of Merrill Lynch's UK private client business.
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