Strong economic and equity market performance helped create nearly a million new millionaires globally in 2014, a new wealth report has shown.
This means that High Net Worth Individuals (HNWIs – people with assets greater than $1 million) grew in both number and wealth in 2014, to 14.6 million and $56.4 trillion, respectively – an increase of about 7%.
These are the findings from the World Wealth Report 2015 (WWR) compiled by Capgemini and RBC Wealth Management.
The wealth report is based on an insights survey that queried over 5,100 HNWIs in 23 major wealth markets across the world, including South Africa.
Notably, the top four nations for HNWIs – the United States (4.3 million), Japan (2.4 million), Germany (1.1 million) and China (890,000) – account for 60.3% of the total global HNWI population.
Of the 920,000 HNWIs added in 2014, 610,000 were added in these top four markets.
Ultra-HNWIs (with assets greater than $30 million) account for 1.0% of the HNWI population, yet control 35% of the total wealth.
According to a South Africa-focused wealth report by New World Wealth, at the end of 2014 there were approximately 46,800 HNWIs living in South Africa, with a combined wealth of US$184 billion.
This equates to roughly 31% of South Africa’s total individual wealth.
Changing wealth landscape
North America continues to rank first overall for HNWI wealth at $16.2 trillion vs. Asia-Pacific’s $15.8 trillion and Europe’s $13.0 trillion.
Asia-Pacific’s wealth growth (11% vs. North America’s 9% and Europe’s 4.6%) is expected to continue, with the region expected to take top spot for HNWI wealth before the end of 2015, the report said.
Total global HNWI wealth is expected to shoot past $70.5 trillion by 2017 at an average annual rate of 7.7%.
Notably, this growth is expected to be driven by the Asia-Pacific region, where an annualised growth rate of 10.3% is anticipated, versus former driver, North America, expecting a more modest 7.0% rate.
This means that by 2017, Asia Pacific is set to lead in terms of HNWI wealth, accounting for an estimated $21.2 trillion of total wealth, versus North America’s $19.9 trillion.
Africa’s growth is expected to remain fairly low, when compared to other markets, with a 5.8% annualised growth rate into 2017. The only region below Africa is Latin America, which is expected to contract by 3.1%.
African HNWI wealth is expected to account for $1.7 trillion of total HNWI wealth in 2017, only slightly larger than the $1.4 trillion in 2014.
How the rich are getting richer
Equities overtook cash as the preferred asset class of HNWIs in 2014, representing 27% of portfolios, according to the report.
HNWIs continue to hold more than one-quarter (26%) of their wealth in cash, doing so primarily to maintain their lifestyle, or for security in case of market volatility.
The balance of portfolios was allocated to real estate, fixed income, and alternative investments.
The report also found that the use of credit in HNWI portfolios is widespread, with 18% of assets being financed through borrowed money.
Credit is used largely as leverage for investments, followed by real estate.