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Merrill Lynch and Capgemini Report Sharp Increases in Wealthy North American and Asian Investors
WORLD WEALTH REPORT SHOWS WORLD-WIDE WEALTH OF HNWIS ROSE 7.7% - REBOUND TO PRE-RECESSION LEVELS
EUROPE, MIDDLE EAST AND LATIN AMERICA ALSO SEE INCREASES, BUT LAG IN WEALTH GROWTH
NEW YORK, June 15, 2004 — T here were an estimated 7.7 million high net worth individuals in the world at the end of 2003, up 7.5% or a net 500,000 people compared with the previous year, according to the 2004 World Wealth Report published today by Capgemini and Merrill Lynch.
The ranks of HNWIs in the United States stood at 2,270,000 at the end of 2003, up 14% or a net 272,000 compared with the previous year. China , at 12%, and India , at 22%, also scored solid gains in HNWIs last year, while Europe , the Middle East and Latin America posted more modest increases.
“As in previous years, high net worth individuals were quick to respond to global trends affecting their ability to preserve and grow wealth. They benefited from a strong stock market rally and solid, global economic growth. In particular, wealthy investors in the U.S. , China and India were able to capitalize on these trends despite a great deal of geopolitical uncertainty,” said James Gorman, president of Merrill Lynch’s Global Private Client group.
Europe , Latin America and the Middle East lagged
While the ranks of the wealthy swelled in Asia and North America , Europe showed a more modest increase, with the number of HNWIs rising 2.4% to 2.6 million. Wealth in the region climbed to $8.7 trillion. Europe as a whole continues to sustain lower average HNWI wealth than North America , primarily due to restrictive income-tax policies which impede the ability to accumulate personal wealth. Spain , Russia and the Czech Republic were notable exceptions where the wealthy investor count increased more rapidly. Latin America fared better in 2003 than it did the previous year, but growth was relatively low both in HNWI numbers and wealth despite the impressive gains in equity markets across the region. Latin American HNWIs, whose ranks edged up 1.3%, continued to have the highest average wealth per HNWI of any major region.
The number of HNWIs in the Middle East rose 2.4% last year.
Shift into Equities, Alternative Investments
“HNWIs benefited in 2003 both from substantial gains in existing equity positions as well as additional equity investment as external conditions stabilized,” said Petrina Dolby, a vice president in Capgemini’s Securities Industry Consulting Practice.
“Wealth advisors have been utilizing more sophisticated research and analysis tools to stay ahead of the market and as a result, HNWIs were among the first investors to begin shifting their focus from low-yielding fixed-income securities back into equities, specialized products and alternative investments,” she said.
“Amid a stable investment climate and low interest rates during the year, wealthy investors in many regions of the world increased their allocations to both hedge funds and structured products, which delivered healthy returns and provided balance to their portfolios,” she said.
Additionally, real estate, though not generally considered a liquid asset, proved appealing to HNWIs for the second year in a row, Ms. Dolby noted.
“HNWIs seem to have gotten it right last year. They increased their exposure to equities, which outperformed other asset classes,” said Bob Doll, President and Chief Investment Officer of Merrill Lynch Investment Managers.
In addition to weighing the right equity exposure, Mr. Doll said other investor considerations should be investing globally, rethinking the make-up of bond portfolios, investment in commodities and non-correlated investments, and putting excess cash back to work.
Wealthy Investors Showing Increasingly Sophisticated Behaviors
Wealthy investors are increasingly acting like institutional investors and have come to expect portfolio risk management, dynamic asset allocation and objective investment advice.
“A growing number of HNWIs are successfully mirroring the behavior of institutional investors. This can be seen in their following a structured process, looking for integrated solutions rather than buying isolated products, and taking the emotion out of investing,” said Alvi Abuaf, vice president at Capgemini and leader of its North American Securities Industry Consulting Practice.
“HNWIs’ primary financial objectives have evolved between 2002 and 2003: Today we see them moving away from an emphasis on preservation of capital and toward an increased focus on accumulation and distribution of wealth,” he said.
And for many wealthy investors, wealth management has become multi-generational, which has created strong demand for services centered on tax, estate and philanthropy planning services.
“Many ultra-wealthy families are creating ‘100-year plans,’ in which family members are treated as business divisions and emphasis is put on corporate-inspired guidelines such as family mission statements, governance structures and guidelines for communication. As a result, many wealth advisors have evolved into the role of CFO to HNWI’s family portfolios and are now more frequently utilizing new products and technologies to meet more sophisticated investment strategies on behalf of clients,” Mr. Abuaf said.
HNWI Growth by Region, 2002-2003
| Region | Assets/wealth | # of people |
| North America | 13.6% | 13.5 % |
| Asia | 10.0% | 8.4% |
| Europe | 3.7% | 2.4% |
| Middle East | 3.3% | 2.4% |
| Latin America | 2.1% | 1.3% |
| Source: Merrill Lynch, Capgemini 2004 World Wealth Report | ||
The Capgemini Group is one of the world's largest providers of Consulting, Technology and Outsourcing services. The company helps businesses implement growth strategies and leverage technology. The Capgemini Global Financial Services practice is working collaboratively with the leading financial services institutions worldwide. Capgemini is a leading provider of comprehensive consulting services to the Securities and Wealth Management industries. The organization employs approximately 55,000 people world wide and reported 2003 global revenues of 5.75 billion euros. More information about individual service lines, offices and research is available at www.capgemini.com
Merrill Lynch (NYSE: MER) is one of the world’s leading financial management and advisory companies with offices in 35 countries and private client assets of approximately $1.5 trillion. As an investment bank, it is a leading global underwriter of debt and equity securities and strategic advisor to corporations, governments, institutions, and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world’s largest managers of financial assets, with assets under management of $513 billion. For more information on Merrill Lynch, please visit www.ml.com.
Contact Capgemini:
Marie DiFrancesco 212.537.8101
mdifrancesco@gcigroup.com
Merrill Lynch
Michael DuVally 2 12.449.3260
mduvally@exchange.ml.com