The wealth of billionaires is increasing and China, on current trends, is poised to overtake the US in terms of numbers over the next few years.
(An earlier version of this item ran on Friday on Family Wealth Report, sister news service to this one.)
The Americas region still holds the top spot for the size of billionaire wealth, rising by 12 per cent last year to $3.1 trillion, driven by tech and consumer sectors, but the pace of increase is slowing, while that of China is accelerating, figures show.
An annual study of billionaires by UBS and PricewaterhouseCoopers drove home the point that China is the hottest region when it comes to churning out new cohorts of this ultra-wealthy segment of wealth owner. Despite some worries about protectionism, rising interest rates and market volatility, China is seen as becoming increasingly important in this space, the authors of the study said.
The billionaire growth story in Asia – there are 814 of them across the whole region – is also driving a rise in the still-nascent family offices market there, and growth is likely to accelerate, Josef Stadler, head of UBS’ global ultra-high net worth business, told this news service when speaking at a conference announcing the study. Until recently, Asia's family office segment has been small relative to that of the US, but rapid growth in a region still dominated by family-run companies is sure to drive rapid growth, with Asian families seeking to learn from other regions.
His colleague, Simon Smiles, chief investment officer for the UHNW business at UBS’ wealth arm, said the rise of Asian family offices and multi-generational wealth holdings is changing how families allocate assets. The days when wealthy Asians took a transactional, trader approach to money are starting to fade. “We’ve seen a big turnaround in the demand for cross-asset portfolios,” Smiles said.
Globally, billionaire wealth rose by $1.4 trillion to $8.9 trillion, up 19 per cent in 2017 from a year ago and its largest absolute growth ever, with entrepreneurs making up the bulk of the difference, the report said. “Billionaires have driven almost 80 per cent of the main breakthrough innovations of the past 40 years. Approximately 70 per cent are technology-related and 80 per cent of the companies behind them are based in the Americas, with 20 per cent in APAC,” it continued.
In total, there were 2,158 billionaires worldwide at the end of last year, up from 1,979 at the end of 2016. Within those figures, 715 were in the Americas at the end of last year, of which 631 were in North America; 629 were in Europe, Middle East and North Africa, with 414 in Western Europe. As far as Greater China was concerned, there were a total of 475 billionaires last year, rising from 418 in 2016. Across all Asia, including Australia and New Zealand, there were a total of 814 billionaires, up from 711.
In Asia, a total of 177 new billionaires were minted in 2017, at the rate of more than three per week. Fueled by China’s rise, APAC billionaires’ total net worth rose 32 per cent last year to $2.7 trillion. At this rate, they will outstrip their American counterparts in just three years.
“Over the last decade, Chinese billionaires have created some of the world’s largest and most successful companies, raised living standards. But this is just the beginning. China’s vast population, technology innovation and productivity growth combined with government support, are providing unprecedented opportunities for individuals not only to build businesses but also to change people’s lives for the better,” Stadler said.
As far as the Americas were concerned, the report struck a more downbeat note. “While the US has the largest concentration of billionaire wealth, its growth has slowed. 2017’s 12 per cent growth, to $3.1 trillion, was far lower than the average global growth rate [of 19 per cent],” the report said.
“The number of new US billionaires is far lower than five years ago. The net number of billionaires grew by just 22 in 2017, down from 87 in 2012,” it said. However, there may be a reason why US new wealth is under-reported: the “stealth wealth” factor, or greater emphasis on owning unlisted companies, rather than those quoted on the stock market, in recent years. This situation may even apply in Europe, the report continued.
In Western Europe, billionaire wealth rose by 19 per cent to $1.9 trillion last year, but this partly reflected the 15 per cent rise in the value of the euro against the dollar over that timeframe.
In Brazil, where the country is recovering from recession, wealth expanded by a mere 2 per cent to $176.7 billion last year, the report added.
(Editorial comment: beneath the headlines, what is clear is that there will be considerable demand in Asia for ideas on how to manage intergenerational wealth transfer and set up family offices and similar structures. The US industry, with a century or more of experience behind it, is particularly well suited to advise Asian families about this. A potentially important business opportunity for North American family office firms and advisors is providing education and support. As far as the other figures are concerned, what they show is that Asia is catching up with the US fast, but that there is still a huge pool of wealth in which wealth managers can earn a profitable living.)