Merrill Lynch Releases 'World Wealth Report'

Assets of the world’s high-net-worth individuals rose in 2007, particularly in emerging markets.

The wealth of the world’s high-net-worth individuals (HNWI) increased by 9.4% in 2007 to $40.7 trillion, according the annual World WealthReport released by Merrill Lynch and Capgemini. The number of HNWI grew 6% to 10.1 million, and the number of ultra-HNWIs increased by 8.8% in 2007. The report found the investors have shifted to safer, less volatile assets and have shown a great interest in green investing (see Investors Look to Greener Pastures).

Emerging Economies

The global economy grew by about 5% in 2007, according to the report. The two primary drivers of wealth generation—real GDP and market capitalization—remained solid throughout the year, and worldwide gains were strong in the first half of the year. Despite the slowdown for mature economies in the latter half of 2007, the emerging economies pulled through, particularly in India, China, and Brazil.

In fact, while the U.S. economic downturn weighed heavily on mature economies, evidenced by sluggish GDP growth and weak stock markets in part of Europe and Asia, emerging markets were able to recover and generate a net gain by April 2008, the report says.

The study says India led the world in HNWI population growth at 22.7%, followed by China at 20.3% and Brazil at 19.1%. Russia was home to one of the world’s 10 fastest growing HNWI populations, despite a slight deceleration last year.

“While trends indicate opportunities exist for wealth management firms to tap into new growth markets, success will go to those that recognize their existing service, delivery, and technology strategies must be adapted and tailored to meet the unique needs of these target growth markets,’ said Robert J. McCann, president of Global Wealth Management at Merrill Lynch, in a release (see New HNW Market Requires New Strategies)

While stock market indexes in the U.S., Europe, and Asia experienced moderate growth, emerging markets were on a winning streak, the report says. “The divide between market capitalization growth in mature and emerging economies was significantly more pronounced in 2007 than in previous years,’ said Bertrand LavayssiÈre, managing director at Capgemini Global Financial Services.

Challenges Ahead

The report says the short-term outlook is likely to vary, but the balance between emerging market strength and mature market recovery will likely persist through the year.

The report cites two major obstacles ahead: growth inhibition in mature markets and inflation in emerging markets. The report predicts that global HNWI wealth will increase at a rate of 7.7% per year to $59.1 trillion by 2012.