The world’s ultra-wealthy population grew to 226,450 individuals last year, and their combined wealth expanded to $27 trillion, according to a new report by Wealth-X, a global wealth information and insight business.
Over the next five years, the report forecast, the number of people with a net worth of $30 million or more will increase to 299,000, with an additional $8.7 trillion of newly created wealth.
The elite group, which comprises a mere 0.003% of the world’s population, grew by 3.5% in 2016, a partial rebound from the previous year’s 7.1% decline. Their aggregate wealth grew by a modest 1.5%.
This report used Wealth-X’s proprietary Wealth and Investable Assets Model, which produces statistically significant estimates for total private wealth and estimates the size of the population by level of wealth and investable assets for the world and each of the top 70 economies that account for 97% of world GDP.
Wealth-X said its proprietary database of more than 100,000 dossiers on ultra-high-net-worth individuals across the globe, as well as further dossiers on individuals lower down the wealth pyramid, allowed it to construct wealth distribution patterns using real, rather than implied, wealth distributions, making the model more reliable.
The Wealth-X report noted sharp regional fluctuations in dollar-denominated wealth creation. North America and Asia recorded the only significant rises in wealth in 2016, up 5.1% and 3.5%, respectively.
Total wealth in Europe edged down 2.4%, and plummeted 10.2% in Latin America and the Caribbean. Fortunes remained largely unchanged in the Middle East and declined by 4.7% in Africa.
Buoyed by a stronger dollar, rising equity markets and a robust tech sector, the U.S. consolidated its dominant status as the world’s leading ultra-high-net-worth country, the number of rich individuals increasing by 6.7% and their wealth by 6% from the year before.
Japan, China, Germany and the U.K. rounded out the top five countries, which accounted for nearly 57% of the global ultra-wealthy population and just shy of 55% of their wealth in 2016.
The New York metropolitan area bolstered its position as the world’s biggest ultra-high-net-worth city in 2016, with a 9% increase in that population over the previous year.
Hong Kong and Tokyo maintained their top-three city status, the former growing by 4.1% and the latter by 17.5%.
London remained the largest city in Europe, despite a 14.6% decline in its ultra-wealthy population, just ahead of Paris, whose population rose by 4.6%.
Although Germany and China ranked high for rich individuals, each country placed only one city among the top 30 cities — Munich at 28 and Shanghai at number 29. Wealth-X said this highlighted how substantial levels of wealth were dispersed across both countries.
The U.S. dominated the top 30 list, with five cities among the first 10 and 17 in total.
Last year, the stock of liquid assets (primarily cash) owned by the ultra-wealthy stood at $9.6 trillion, accounting for 35.4% of ultra-high-net-worth holdings. Abundant liquidity reflected a continuing search for yield and underscored the enormous spending potential of the world’s ultra-wealthy, the report said.
A recent report noted that rich American families have $4 trillion up for grabs.
Wealth-X said the value of all the ultra wealthy’s public holdings, such as listed equities, totaled $6.8 trillion in 2016, equivalent to a 25% allocation. The volume of global M&A transactions was the third-highest on record in 2016, whereas IPO activity was relatively weak.
The remaining 6.6% share of wealth was held in real estate and other luxury assets, such as yachts, planes, automobiles, art and jewelry.
In the first quarter of 2017, wealthy U.S. investors favored real estate and commodities.
Wealth-X said short-term prospects for ultra-wealth creation have been boosted by the moderate but noteworthy upturn in global economic activity since late 2016. The greater optimism should not be overstated, it said, yet the expectation is for a more supportive economic environment for wealth creation during 2017.
Throughout the five-year forecast period, several underlying structural trends in the global economy will continue to provide opportunities for asset-value appreciation, according to the report.
Growth drivers will include urbanization, rising income levels, the “premiumization” of consumption (a shift among consumers toward more expensive premium products as their income/wealth rises) and an increase in women working in developing markets, as well as the ongoing rapid adoption of transformative digital technologies around the world.
Bankers and wealth advisors in a recent survey said they expected the rate of growth over the next 10 years to slow. Another sobering note: 90% of wealthy families see their fortunes disappear by the end of the third generation.
— Check out Heads of Wealthy Families Hold Off Disclosing Inheritance: Wilmington Trust on ThinkAdvisor.