Global private financial wealth grew by 1.9 percent in 2011 to reach a total of $122.8 trillion. (See Exhibit 1.) The rise was considerably weaker than in either 2009 or 2010—when global wealth grew by 9.6 percent and 6.8 percent, respectively—owing largely to overall economic uncertainty and struggling equity markets in major developed economies.
The evolution of private wealth varied considerably by region in 2011, highlighting the difference in how the year’s economic turbulence affected the developed and developing worlds. North America, Western Europe, and Japan all lost private wealth, while the rapidly developing markets in Asia-Pacific and Latin America sustained the double-digit growth that they have experienced in recent years.
The Middle East and Africa continued to grow but at a more moderate rate than in previous years, owing particularly to political instability in the region. North America remained the wealthiest region globally, followed by Western Europe and the Asia-Pacific (ex Japan) region.
Overall, global growth in private wealth is clearly being driven by rapidly developing economies in the “new world,” not by the “old world” of traditional, mature ones. (See Exhibit 2.) In the BRIC countries, for example, where nominal GDP growth was 15.5 percent on a weighted-average basis, wealth increased by 18.5 percent in 2011.
Equity markets suffered across most of the world in 2011, with positive showings in only a few countries. Europe’s equity markets were hurt the most, with Greece’s falling by a staggering 52 percent. In the Middle East, Egypt’s stock market declined by an almost-as-steep 49 percent.
Globally, the amount of private wealth held in equities declined by 3.4 percent, driven by both negative market performance and asset reallocation. Wealth held in bonds (corporate and government) grew by 3.3 percent, and wealth held in cash and deposits rose by 5.2 percent. The overall asset mix changed somewhat from year-end 2010, although the share of wealth held in equities lost only about 2 percentage points to cash and deposits and still represented about 33 percent of global private wealth at the end of 2011 (versus 35 percent in 2010).
In terms of household segments, the highest growth rate was in the ultra-high-net-worth (UHNW) segment (households with more than $100 million in wealth), which saw its wealth rise by 3.6 percent—compared with average growth of 1.7 percent across all other segments.
Looking ahead, private wealth is expected to post a compound annual growth rate (CAGR) of 4 to 5 percent over the next five years to reach more than $150 trillion by the end of 2016. Equities will be the fastest-growing asset class, with a projected CAGR of 4.9 percent. By year-end 2016, the share of global wealth held in equities should be 34.0 percent of the total, still below the precrisis share of 38.5 percent. In addition, over the next five years, the total amount of wealth held by all clients with more than $1 million in wealth should show a CAGR of around 6 percent annually—driven mainly by an increasing number of households in this segment in Asia-Pacific. (See Exhibit 3.) Average wealth for these households is expected to increase just marginally, however. Globally, the UHNW household segment will continue to grow the fastest over the next five years, with a projected CAGR of 8 percent. By contrast, we should see a CAGR of 3 percent in segments below the $1 million mark.
The growth of private wealth varied widely across all regions in 2011.
North America. Private wealth in North America declined by 0.9 percent in 2011 to $38.0 trillion. The UHNW household segment was hit particularly hard, losing 2.4 percent of its wealth. Overall, the amount of wealth held in equities and bonds decreased by 3.6 percent and 2.1 percent, respectively. The share held in cash and deposits grew by 3.5 percent.
A near default on U.S. government debt, combined with the euro debt crisis, made 2011 an unpleasant year for the U.S. economy. These events, along with the downgrade of the nation’s credit rating, led to significant investor uncertainty, with the S&P 500 ending the year basically unchanged from 2010. However, stock markets both in the United States and in other developed countries are expected to gradually recover, driven partly by the assumed future stabilization in the euro zone—painful as that may be. North American wealth is projected to post a CAGR of 1.8 percent over the next five years to reach $41.5 trillion by the end of 2016.
Western Europe. Although Western Europe did not suffer as much as North America, the euro debt crisis took its toll, and private wealth declined by 0.4 percent to $33.5 trillion. The region remained the second wealthiest worldwide. The amount of Western European wealth invested in equities fell by a steep 7.1 percent—owing to weak performance in Western European markets and continued asset reallocation—with the amount held in bonds rising more sharply than in previous years at 3.2 percent, and cash and deposits increasing by 2.2 percent. Equities lost a 2.1 percentage point share and constituted 28.5 percent of Western European private financial wealth at the end of 2011.
Extreme levels of both government and private debt, as well as the threat of bankruptcy faced by several European Union countries, led to double-digit stock-market declines in some of the region’s largest economies—Germany and France—as well as in Greece, Italy, Spain, and Portugal. Owing mainly to repatriations, offshore wealth declined by 2.2 percent, reducing its share of total Western European private wealth to 7.6 percent. Wealth in Western Europe is projected to show a CAGR of 1.8 percent and to reach $36.7 trillion by the end of 2016, driven by moderate equity-market recoveries in the largest economies.
Asia-Pacific (ex Japan). Private wealth in Asia-Pacific (ex Japan) increased by 10.7 percent in 2011 to $23.7 trillion, enabling the region to widen its gap with Japan as the third-wealthiest area globally. The strongest growth was in the higher wealth bands, with the share of total wealth held by households with more than $1 million in wealth increasing to 48 percent. The amount of wealth held in equities grew by 4.1 percent, a far weaker performance than the average annual growth of 17.7 percent witnessed over the previous five years. But wealth held in bonds rose sharply by 17.5 percent, and cash and deposits increased by 13.4 percent.
Despite relatively poor stock-market performance in many large Asia-Pacific countries, notably India and China, strong GDP growth driven primarily by high levels of government and private consumption led to new wealth generation. Wealth in the region is expected to continue growing at a double-digit rate, with a projected CAGR of 11.1 percent, reaching $40.1 trillion by the end of 2016, at which time it will have slightly overtaken Western and Eastern Europe (combined). These gains should be driven largely by sustained strong GDP growth in China and India and overall stronger stock-market performance.
Japan. Private wealth in Japan decreased by 2.0 percent in 2011 to $17.8 trillion. The value of wealth held in equities fell by 7.6 percent, while amounts held in bonds as well as in cash and deposits remained virtually flat. Drivers of the overall decline included the lingering effects of the March 2011 earthquake and tsunami—and the subsequent Fukushima nuclear accident—as well as poor stock-market performance resulting from general economic instability. Nonetheless, Japan is expected to overcome these challenges over the next five years. Private wealth is projected to post a CAGR of 0.8 percent to reach $18.5 trillion by the end of 2016, recovering to pre-Fukushima levels.
Eastern Europe. Russia, with GDP growth well above that of most mature economies, was the primary driver of the 2011 increase in Eastern European wealth, which rose by 14.4 percent to $1.9 trillion. Each of the three asset classes grew by roughly 14 percent.
Eastern European wealth is forecast to grow significantly faster than Western European wealth—at a CAGR of about 8.7 percent over the next five years—reaching $2.9 trillion by the end of 2016, with the bulk ($2.0 trillion) held in Russia. These gains will be driven largely by Russia’s status as the world’s largest oil producer and its continuing GDP momentum. The UHNW household segment is forecast to show the strongest growth, with wealth rising annually by 12 percent through 2016.
Middle East and Africa. Middle Eastern and African stock markets suffered from the political instability caused by the uprisings across the Arab world in 2011. Still, the region’s private wealth grew by 4.7 percent to $4.5 trillion in 2011, driven by high savings rates and strong double-digit GDP growth in oil-rich countries such as Saudi Arabia and Kuwait. Although the amount of wealth held in equities decreased by 2.6 percent, the amount held in bonds rose by 13.3 percent and cash and deposits grew by 5.1 percent. Wealth in the UHNW household segment posted the strongest growth, at 9.0 percent, driven by government programs that benefit large family conglomerates. Private wealth in the region is projected to show a CAGR of 6.6 percent to reach $6.1 trillion in 2016, largely as a result of continued strong GDP expansion in oil-rich countries.
Latin America. Latin American private wealth grew by 10.6 percent in 2011 to $3.5 trillion, driven primarily by strong GDP growth in Brazil and Mexico. Latin American stock markets were less affected by global economic uncertainty than those in many other economies, with regional wealth held in equities rising by 2.8 percent. Wealth held in bonds soared by 16.6 percent, and cash and deposits rose by 9.2 percent. Private wealth in Latin America is projected to post a CAGR of 8.9 percent over the next five years to reach $5.4 trillion by the end of 2016—more than double the amount of wealth held in the region in 2006 but still remaining relatively small compared with Asia-Pacific. Particularly in Brazil and Mexico, onshore offerings are becoming more sophisticated as international players enter the market.
Although the number of millionaire households decreased by a combined 182,000 in the United States and Japan in 2011, globally the number grew by 175,000 as many households crossed the millionaire threshold in developing economies, particularly China and India. The total number of millionaire households reached 12.6 million by the end of 2011, making up about 0.9 percent of the households in our sample (comprising 63 markets representing more than 98 percent of global GDP). The United States still had the largest number of millionaire households (5.1 million), followed by Japan (1.6 million) and China (1.4 million). (See Exhibit 4.) China’s number of millionaires should continue to grow strongly, driven by the large number of initial public offerings (IPOs) expected in the country as well as by new wealth generated mainly by entrepreneurs.
The highest density of millionaire households in 2011 was in Singapore—where more than 17 percent of all households have private wealth of $1 million or higher—followed by Qatar (14.3 percent), Kuwait (11.8 percent), and Switzerland (9.5 percent). The United States had the largest number of both UHNW and billionaire households in 2011 at 2,928 and 363, respectively. Relative to population size, however, Switzerland had the highest number of UHNW households, and Hong Kong was the leader in the number of billionaires—driven partly in both countries by the immigration of billionaire families.
UHNW households held $7.1 trillion, or 5.8 percent of global private wealth, in 2011, a 3.6 percent increase over 2010. At a projected CAGR of about 8 percent over the next five years, UHNW households should hold $10.3 trillion, or 6.8 percent of global wealth, by the end of 2016.