Emerging market economies such as
India and

China were strong drivers of growth in the population and wealth of high net worth individuals last year, while globally, the increase in the numbers of such individuals rose at a slightly slower pace than in 2006, according to an annual Merrill Lynch/Capgemini survey.

Assets of HNW individuals rose to $40.7 trillion, an increase of 9.4 per cent over 2006, and a slightly weaker growth rate than the 11.4 per cent rise in 2006 from 2005. The number of HNW individuals rose by 6 per cent to 10.1 million, compared with a year-on-year rise of 8.3 per cent in 2006.  The ultra-HNW segment enjoyed the strongest growth by population, rising by 8.8 per cent and up by 14.5 per cent in accumulated wealth.

In the survey, a HNW individual is defined as someone with at least $1 million of investable wealth, excluding collectables and the primary residence. An ultra HNW individual has at least $30 million of assets.

The report showed that despite the impact of the credit crunch, the number of wealthy individuals continued to grow at a robust pace in most nations although in countries such as

Ireland, which was hit by a sharp pullback in share and property markets, the number actually shrank. Meanwhile, as markets turned volatile, investors turned to more conservative assets such as cash to protect their wealth.

The data adds to the evidence from the annual survey by Scorpio Partnership, also published today, that there has been a slight deceleration in the rate of growth in the assets held by HNW individuals and their families. Over the medium term, however, both reports showed the wealth management industry in rude health. The data also explains the busy trend of banks building teams of managers in financial hubs such as Singapore and Dubai.

Although full data on what has happened in 2008 will not be available until the middle of next year, the Merrill Lynch/Capgemini World Wealth Report expects total assets of HNW individuals to be worth $59.1 trillion by 2012, representing an annual rise of 7.7 per cent.

Among other trends noted in the report is the increasing concentration of wealth. The assets of HNW individuals rose at a quicker rate than the population of such individuals, suggesting greater demand for services for ultra HNW clients from private banks and institutions such as family offices.

“I think we will see this trend continue, but both [HNW and ultra-HNW] segments of wealth management will also grow at a pretty fast pace. I still see private banks continuing to segment their clients and develop different types of service models,” Nick Tucker, market leader for UK and Ireland, global wealth management at Merrill Lynch, told a gathering of journalists.

Emerging markets put impressive growth figures on the board last year, countering a milder set of figures for established industrial nations in North America, Western Europe and

Japan. The population of HNW individuals in Latin America and the
Middle East rose 20.4 per cent and 17.5 per cent, respectively.

Among individual nations,
India was the brightest star: its population of HNW individuals skyrocketed by 22.7 per cent last year, while
China’s headcount rose by 20.3 per cent,
Brazil’s rose by 19.1 per cent, and

Russia’s by 14.4 per cent. Other notable gains were made in
South Korea, up 18.9 per cent, and

Singapore, rising by 15.3 per cent in the number of HNW individuals.

In developed economies, the growth rates were generally far weaker. The number of HNW individuals rose by just 3.7 per cent in Europe in 2007 from 2006; 4.2 per cent in
North America and 8.7 per cent in Asia-Pacific. In Latin America, growth was quicker, up 12.2 per cent, up 15.5 per cent in the Middle East and up by 10 per cent in
Africa. In terms of wealth held by HNW individuals, the quickest gain was in Latin America, where asset values rose by 20.4 per cent, contrasting with a rise of just 4.4 per cent in
North America.

The bumpier market conditions produced a reduced appetite for relatively risky assets, although further ahead, the report found that investment advisors expect clients to increase their exposure to areas such as equities and hedge funds. Last year, HNW individuals slashed exposure to property to 14 per cent of all assets from 24 per cent in the previous year, and are forecast to cut this to just 11 per cent next year. Cash holdings are expected to be 18 per cent next year, up from 17 per cent in 2007, which was up from 14 per cent the year before.

“As signs of financial market recovery appear, we project that HNWIs will likely return to their pursuit of high returns, particularly in emerging and frontier markets – such as Bangladesh, Jamaica, Slovenia, and many other countries in Africa, South Asia, Eastern Europe and the Caribbean – and alternative investments,” the report said.

To view the report in full, click on www.capgemini.com/worldwealthreport