Capgemini: HNWI population and their wealth hit highs

14 July 2015 Consultancy.uk

The rich, those in the high net worth asset ownership class, now hold $56.4 trillion and tally 14.6 million, adding nearly a million (920,000) new millionaires since 2014, research by Capgemini and RBC Wealth Management shows. The coming years are expected to see this category continue to grow in wealth, with a projected growth rate of near 8% until 2017. In terms of asset classes held by the rich, equity continues to come out on top, followed closely by cash.

In a recently released report, titled ‘World Wealth Report 2015’, consulting firm Capgemini and RBC Wealth Management explore the quantitative side of the world’s High Net Worth Individuals (HNWI)*. The study also encompasses the 'Global HNW Insights Survey' which involved more than 5,100 HNWIs across 23 major wealth markets in North America, Latin America, Europe, Asia-Pacific, the Middle East and Africa.

HNWI population growth

Growing more wealthy
HNWI continue to do well, finds this years’ report, with the number and the wealth of those within the category increasing to 14.6 million and $56.4 trillion, respectively. Regionally the majority of that wealth is in the hands of those in North America at $16.2 trillion, which is a growth of 9.1%. The Asia-Pacific region holds wealth of $15.8 trillion at a growth rate of 11.4% compared to last year. The only region to lose wealth was the Latin American region, dropping -0.5% to $7.7 trillion.

The growth of new entrants to the millionaire club was the fastest in the Asia-Pacific region with its HNWI up 8.5% to 4.69 million and edging above the North America’s 8.3% growth to 4.68 million. Latin America saw its number of HNWI drop 2.1%.

HNWI wealth distribution

“2014 was the sixth consecutive year of growth for the High Net Worth market, with robust equity returns and economic performance enabling wealth to grow by about 7%, following double digit growth the year prior,” explains George Lewis, Group Head of RBC Wealth Management & RBC Insurance. “Asia-Pacific led the growth in wealth this year and just edged out North America as the new leader in High Net Worth population. Looking ahead to the next few years, we expect Europe to be a large driver of HNWI wealth as the region recovers economically.”

Without considerable changes in the way in which wealth is being preserved and extended, the prospects for HNWI looks good. Following a projected growth of almost 8% between 2014 and 2017, global HNWI wealth is expected to hit $70.5 trillion in 2017. Regionally, the Asia-Pacific is set to see a 10.3% growth, while Europe is set for 8.4%. The North American market will only manage modest growth of 7% annually and Latin America of 3.1%.

HNWI Wealth Forecast 2012-2017

Enjoying equity
In terms of the preferred medium for their assets, equity stood above cash, at 26.8%, up slightly from its 2013 value of 26.1%. There is some variation across regions, with North Americans holding 33.9% of their wealth as equity, compared to 22.8% in the Asia-Pacific region (not including Japan). Cash holdings are down somewhat from 2013, to 25.6% of total assets, while alternative investments are up from 2013, hitting 13% of all classes globally. 

“Approximately five years into a steady rise in global stock markets, equities have overtaken cash as the dominant asset class in HNWI portfolios,” comments Andrew Lees, Global Sales Officer at Capgemini Global Financial Services. “Increased exposure to equities indicates a slowly expanding appetite for risk as High Net Worth Individuals show comfort in equities taking up a larger portion of portfolios, as asset values rise.”

Breakdown of HNWI Financial Assets

Cash holdings
The survey highlights a number of reasons from respondents for their choice to hold cash. Globally, 30.7% hold cash for security in case of volatility, while 35.1% do so to finance their lifestyle needs. Around 15% have cash on hand in case of unique financial needs that may turn up unexpectedly.

Particularly North American wealth owners find the security of holding onto cash important (37.1%), although lifestyle remains the most important reason, rated by 37.3% of regional respondents. The possibility of using cash for a unique opportunity is the highest in the Latin American segment, at 26%, equal with their cash needs to support their lifestyles.

Reasons for HNWI to hold cash

* High Net Worth Individuals (HNWI) are defined as those having investable assets of $I million or more, excluding primary residence, collectibles, consumables and consumer durables. The World Wealth Report 2015 combines both HNWI and UHNWI (Ultra High Net Worth Individuals) into the same HNWI category but makes further distinctions where needed.

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