Ultra-high-net-worth households saw the largest amount of growth in 2011, and that segment is expected to grow at the fastest clip in the next five years at a projected compound annual growth rate of 8%, according to Boston Consulting Group’s 2012 Global Wealth Report released on Thursday.
The ultra-high-net-worth segment, defined by households with more than $100 million in wealth, grew by 3.6% internationally in 2012, versus an average of 1.7% growth in all other household wealth areas. The 8% projected growth for those households comes as wealth groups below $1 million are expected to grow at a 3% compound annual growth rate.
The results are part of a new report titled “The Battle to Regain Strength” that was released by Boston Consulting Group in New York on Thursday. The report outlined the challenges facing international private wealth, which rose 1.9% in 2011 to $122.8 trillion, versus 6.8% growth in 2010 and 9.6% in 2009.
Last year’s growth spread across the globe unevenly, with a .9% decline in private wealth in “Old World” areas such as North America, Western Europe and Japan, and a 10% gain in “New World” areas like Asia-Pacific, Eastern Europe, Latin America, the Middle East and Africa.
“BCG has consistently talked about a two-speed world, and it’s especially apparent this year in emerging markets,” said Monish Kumar, senior partner and global leader of asset and wealth management at Boston Consulting Group. “All the growth was driven off developing markets, and the developed world pretty much stayed where it was.”
In North America last year, private wealth fell .9% to $38 trillion as investors worried about debt issues plaguing both the U.S. and Europe and the U.S. debt downgrade. The ultra high net worth segment there lost 2.4% of their wealth in North America, while investments fell by 3.6% in equities and 2.1% in bonds. Wealth held in cash and deposits rose 3.5%.
Despite the euro debt crisis that hung over Western Europe last year, the area continued to be the second wealthiest region of the world after the U.S. In 2011, private wealth fell by .4% to $33.5 trillion. Wealth in equities dipped by 7.1%, while wealth increased 3.2% in bonds and 2.2% in cash and deposits.
The Asia-Pacific region, excluding Japan, came in third with $23.7 trillion in private wealth, a 10.7% gain driven in part by its strong growth in top wealth. Last year, households with more than $1 million grew to 48% in that region. At the same time, wealth in equities rose just 4.1%, compared to the average 17.7% growth over the last five years. Wealth in bonds rose 17.5%, while cash and deposits climbed 13.4%.
Boston Consulting Group projects that wealth in the Asia-Pacific region will grow at an 11.1% compound annual growth rate to $40.1 trillion by the end of 2016. Those gains will come from stock market performance in the region, as well as strong GDP growth expected from China and India.
“This is very good news for all those banks that operate in those segments,” said Peter Damisch, partner and global leader of wealth management at Boston Consulting Group. “There is a lot to grow and a lot to win in the upper part of the wealth pyramid going forward.”
By contrast, wealth in North America is expected to grow at a 1.8% compound annual growth rate to $41.5 trillion by the end of 2016, while Western Europe will grow at 1.8% to $36.7 trillion.
Ultra high net worth households rose 3.6% from 2010 to $7.1 trillion, or 5.8% of global wealth. The U.S. had the most ultra high net worth households in 2011 at 2,928, down by 61 from the previous year, followed by the U.K. with 1,125 and Germany with 807. The top three countries in terms of number of ultra high net worth households per 100,000 households were Switzerland, Singapore and Austria.
The total number of millionaire households rose by 175,000 internationally, but fell by 182,000 total in the U.S. and Japan. The U.S. had the most number of millonaire households at 5.13 million in 2011, in spite of losing 129,000 from the previous year, followed by Japan with 1.59 million and China with 1.43 million. The top three countries in terms of proportion of millionaire households were Singapore, Qatar and Kuwait.