Capgemini’s World Wealth Report 2019 shows that the ultra-high-net-worth individual population (defined as having $30 million or more) declined by 4%, and their wealth declined by around 6%. This plunge accounted for 75% of the total global wealth decrease.
This is the biggest section in free-fall with what the report calls “mid-tier millionaires” (high-net-worth individuals (HNW) with between $5-30 million of wealth) representing 20% of the total decline, and “the millionaire-next-door” segment (who have between $1-5 million of wealth and makes up almost 90% of the HNWI population) remaining the least affected.
The decline in global wealth was driven by China with the Asia-Pacific region representing $1 trillion of the global decline in wealth, as the HNWI population decreased by 2% and HNWI wealth by 5%. The report notes: “China alone was responsible for more than half (53%) of Asia-Pacific and more than 25% of global HNWI wealth loss.”
The report adds that HNWI wealth declined across nearly all other regions: Latin America declined by 4%, Europe by 3% and North America by 1%. The Middle East bucked the trend, generating 4% growth in HNWI wealth and increasing its HNWI population by 6% due to strong GDP growth and financial market performance.
Global Wealth Woes
Cliff Evans, Vice President - Head Digital for Banking at Capgemini told Forbes that billionaires - the top bracket of UHNWIS - are not immune from current global trade headlines he defines as a “period of increased uncertainty”.
He adds: “We don't separate out billionaires, but I don't think that they're immune or exempt from this. UHNWIs is where we've seen the biggest decline and they're a part of that globally.”
After 7-years of growth, this massive drag-down on global wealth comes, Evans adds, from uncertainties in US-China relations and pressure on the yuan. China, the report claims, made up nearly 53% of the overall Asia-Pacific wealth decline and therefore accounted for more than 25% of the global HNWI wealth decline, while Chinese markets lost more than $2.5 trillion in market capitalization over the year.
James Barton runs the investment arm of the Featherstone family office, he tells Forbes via email, "2018 was a year when both equity markets and bond markets retracted globally, the moth-bitten, backward-looking model of 'Equities go down/Bonds go up' is broken as these asset classes have become correlated."
Barton says that unimaginative wealth management is part of the problem, adding that "conventional wealth managers—and the benchmarks they desperately hug—have not worked this out yet and still mindlessly 'diversify' their clients' money into asset classes which are behaving in the same way."
Despite France’s Bernard Arnault making headlines in becoming the third (and Europe’s first) billionaire to cross into the ultra-rarefied club of those with a net worth above $100 billion, Europe was responsible for a massive 24% – or US$500 billion – of the overall $2 trillion decline in HNWI wealth in 2018.
The report finds that Europe experienced a near 0.5% decrease in HNWI population and a 3% decrease in HNWI wealth with the United Kingdom leading the way. “HNWI wealth performance in the United Kingdom took a significant hit with a 6% decline.” The report adds that UK economic growth is at its lowest point since 2012 in a large part down to, “political paralysis triggered by Brexit” creating market uncertainty, with key sectors such as manufacturing and construction sectors in sharp decline.
However North America was one of three regions to record an increase in HNWI population (0.4%), although HNWI wealth decreased slightly by 1%. The report adds, “HNWIs in the United States outperformed those in other developed nations as a result of economic growth – US GDP rose by 3% in 2018 compared with 2% in 2017 as unemployment shrank and wages inched upward.”
David Dawkins, Forbes Staff