World's Rich Got Richer During Recession

Published: Tuesday, 22 Jun 2010 | 11:53 AM ET Text Size By: Reuters

The rich grew richer last year, even as the world endured the worst recession in decades.

A stock market rebound helped the world's ranks of millionaires climb 17 percent to 10 million, while their collective wealth surged 19 percent to $39 trillion, nearly recouping losses from the financial crisis, according to the latest Merrill Lynch-Capgemini world wealth report.

Stock values rose by half, while hedge funds recovered most of their 2008 losses, in a year marked by government stimulus spending and central bank easing.

"We are already seeing distinct signs of recovery and, in some areas, a complete return to 2007 levels of wealth and growth," Bank of America Corp wealth management chief Sallie Krawcheck said.

The fastest growth in wealth took place in India, China and Brazil, some of the hardest hit markets in 2008. Wealth in Latin America and the Asia-Pacific soared to record highs.

Asia's millionaire ranks rose to 3 million, matching Europe for the first time, paced by a 4.5 percent economic expansion.

Asian millionaires' combined wealth surged 31 percent to $9.7 trillion, surpassing Europe's $9.5 trillion.

In North America, the ranks of the rich rose 17 percent and their wealth grew 18 percent to $10.7 trillion.

The United States was home to the most millionaires in 2009—2.87 million—followed by Japan with 1.65 million, Germany with 861,000, and China with 477,000.

Switzerland had the highest concentration of millionaires: nearly 35 for every 1,000 adults.

Yet as portfolios bounced back, investors remained wary after a collapse that erased a decade of stock gains, fueled a contraction in the global economy and sent unemployment soaring.

The report, based on surveys with more than 1,100 wealthy investors with 23 firms, found that the rich were well served by holding a broad range of investments, including commodities and real estate.

"The wealthy allocated, as opposed to concentrated, their investments," Merrill Lynch head of U.S. wealth management Lyle LaMothe said in an interview.

Millionaires poured more of their money into fixed-income investments seeking predictable returns and cash flow. The challenge ahead for brokers is convincing clients to move off the sidelines and pursue riskier, more fruitful investments.

"There is still a hesitancy," LaMothe said. "Liquidity is incredibly important and people need cash flow to preserve their lifestyle—but they want to replace that cash flow in a way that does not increase their risk profile."

The report found that investor confidence in advisers and regulators remains shaken. The rich are actively managing their investments, seeking customized advice and demanding full disclosure about the securities they buy.

There were signs that investors were shaking off their concerns. Families that kept money closer to home during the crisis began shifting money to foreign markets, particularly the developing nations.

North American and European investors are expected to increase their exposure to Asian markets, which are projected to lead the world in economic expansion. Europe's wealthy are seen increasing their U.S. and Canadian holdings.

More wealthy clients also are taking a harder look at large companies that pay healthy dividends, as an alternative to bonds and their razor-thin yields.

"Investors are open to areas they hadn't thought about before as they try to preserve their ability to be philanthropic, to preserve their lifestyle," LaMothe said. "To me, the report underscored clients are involved and they're not inclined to stay in 1 percent savings accounts."

 

Yeah, it's called inflation.

2007 levels if wealth... someone tell the fool it's 2010. 33% drop in new home sales reported today. Green shoots!

We'll see an 8xx handle on SPX by the end of 2011.

 

Good thing. Otherwise the Left wouldn't have any blood to suck for their social agenda.

 

What a ridiculous propaganda piece. The stock market had double-digit gains in 2009. The rich got richer because most of them are net long, mostly buy-and-hold types. The same is true for the middle class and even the lower-class if they have some money in 401(k)s or something.

Did the rich get richer from Oct. 2007 through March 2009? I doubt it, at least not in the aggregrate.

Did they get richer during the entire year of 2009? Yeah, of course.

 

Asia’s Millionaires Match Europe’s, Merrill Says (Update1)

By Joyce Koh, Alexis Leondis and Warren Giles

June 23 (Bloomberg) -- Asia-Pacific’s number of millionaires equaled Europe’s for the first time last year as the region powered the global economy’s recovery, according to a report by Capgemini SA and Merrill Lynch & Co.

The number of individuals with at least $1 million of investable assets in Asia-Pacific rose 26 percent to 3 million in 2009, matching Europe and almost overhauling North America’s 3.1 million, according to the 14th annual World Wealth Report published yesterday.

Asia “continues to lead the global economic recovery and this has benefited many of the markets in the region in terms of both growth and wealth creation,” Ong Yeng Fang, market managing director for Indonesia, Philippines and Thailand at Merrill Lynch Wealth Management, said at a conference in Singapore today. Given Europe’s debt crisis, “there is a very high possibility that their numbers will be surpassed.”

Millionaires in Asia-Pacific -- home to 60 percent of the world’s population and the two fastest-growing major economies - - boosted combined assets 31 percent to $9.7 trillion, the fastest regional increase, according to the survey. The MSCI Asia-Pacific Index posted its biggest annual gain in six years as stimulus spending in China reignited economic growth.

Barclays Plc, Morgan Stanley and UBS AG are rushing to expand their private banks in Asia-Pacific as rich people from Indonesia to China invest more money. Wealth in the region, excluding Japan, is expected to rise at almost double the global pace, the Boston Consulting Group said this month.

“This region has the best economic growth, the highest levels of wealth creation, and many players are coming to this part of the world, or are expanding,” Charles Mak, Morgan Stanley’s head of private wealth management, said in an interview this month.

Global Wealth

The number of millionaire households, or those with at least $1 million in investable assets excluding primary residences, expanded to 10 million globally from 8.6 million a year earlier, according to Merrill Lynch and Capgemini. North America’s number of millionaires grew 17 percent, the second- biggest regional increase.

Worldwide, global wealth held by millionaires rose by 19 percent to $39 trillion after falling more than 19 percent in 2008 following the credit crisis that sent stock indexes to their worst annual losses since the Great Depression and slashed the value of real-estate holdings, hedge-fund and private-equity investments.

Assets in North America advanced 18 percent in 2009 to $10.7 trillion. The U.S. had 2.87 million millionaires, followed by 1.65 million in Japan and 861,500 in Germany, the report said. The three countries accounted for 53.5 percent of the world’s millionaires in 2009. The number of millionaires in Hong Kong soared 104 percent and in India, 51 percent to 126,700.

‘More Cautious’

“High-net-worth investors have emerged more cautious and conservative, but they have emerged,” Lyle LaMothe, head of U.S. wealth management for Merrill Lynch global wealth management, said in New York.

Last year’s gains were driven by market recovery and government stimulus efforts, the survey said. The Standard & Poor’s 500 Index rose more than 20 percent in 2009 after falling 38 percent in 2008, its steepest annual drop since 1937.

Ultra-high-net-worth individuals with more than $30 million to invest saw their wealth rise by almost 22 percent in 2009, faster than other millionaires, according to the report, which attributed the gain to a “more effective re-allocation of assets.”

Allocations

Millionaire investors “warily returned to markets in cautious pursuit of returns,” LaMothe said. Equity holdings worldwide rose to 29 percent from 25 percent and fixed-income investments increased to 31 percent from 29 percent as cash and deposits dipped to 17 percent from 21 percent.

Portfolio allocations to real estate stayed the same at 18 percent as residential real estate assets’ increase balanced out commercial real estate holdings’ decrease.

Wealthy investors in all regions except Latin America increased their relative share of holdings in markets outside their home regions, reversing a trend that began in 2006 of increasing investments in home countries.

“What the markets and economy destroyed in 2008 was reconstructed in 2009,” Patrick Ramsey, chief executive officer of Merrill Lynch Bank (Suisse) SA, told reporters in Zurich. “Volatility is now part of our world, and we have to learn to live with it.”

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

Last Updated: June 23, 2010 02:47 EDT

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=auBwbjYaGrTU

 

Of course they did! Where else did the money go?

You are confusing the rich with the herd.

 

Uh, no. It's not a zero sum game and most of the "rich" aren't that savvy at trading.

 

Doesn't http://www.nodeathtax.org/deathtax prevent this?