October 2012Research Institute Thought leadership from Credit Suisse Research and the world’s foremost experts Global Wealth Report 2012
GLOBAL WEALTH REPORT 2012_2Contents03 Introduction04 Global wealth overview08 Household wealth: A global portrait16 The global wealth pyramid22 Household debt31 Inheritance of wealth38 What will the future bring?45 Wealth of nations 46 United States 47 Japan 48 China 49 India 50 France 51 United Kingdom 52 Switzerland 53 Russia 54 Singapore 55 Korea 56 Indonesia 57 South Africa 58 Chile COVERPHOTO: ISTOCKPHOTO.COM/CHRIS HEPBURN, PHOTO: ISTOCKPHOTO.COM/COTESEBASTIEN 59 Brazil 60 Australia 61 Canada62 Authors63 Disclaimer / Imprint For more information, please contact: Richard Kersley, Head of Global Research Product, Credit Suisse Investment Banking, email@example.com Michael O’Sullivan, Head of Portfolio Strategy & Thematic Research, Credit Suisse Private Banking michael.o’firstname.lastname@example.org
GLOBAL WEALTH REPORT 2012_3IntroductionThe Credit Suisse Global Wealth Report and the more detailedaccompanying Global Wealth Databook aim to provide the mostcomprehensive study of world wealth. Unlike other studies, theymeasure and analyze trends in wealth across nations, from thevery bottom of the “wealth pyramid” to ultra high net worthindividuals. This third Wealth Report continues our close collaborationwith Professors Anthony Shorrocks and Jim Davies, recognizedauthorities on this topic, and the architects and principal authorsof “Personal Wealth from a Global Perspective,” OxfordUniversity Press, 2008. The last two Wealth Reports painted a detailed picture of fast-rising wealth in the emerging world. This year in the context ofthe debate on the “fiscal cliff” and the Eurozone crisis, wechange tack and focus on indebtedness by bringing our uniquedata set of household debt to bear. Using new wealth data, we review past trends in householddebt, and combine household and government debt to highlightwhich countries have sustainable overall debts levels and whichhave most problems with government debt. Another new focus is inheritance, an important aspect ofwealth transfer. Sixty-nine percent of Forbes billionaires areself-made, with less than one-third having inherited their wealth,although if we exclude China, Russia and the other transitioncountries, this figure rises to slightly above one-third. Movingbeyond billionaires to look at all households in the OECD, thedata are not precise, but our work suggests that 30%–50% oftheir wealth is inherited. Overall, we estimate that global household wealth in mid-2012 totaled USD 223 trillion at current exchange rates,equivalent to USD 49,000 per adult globally. Looking ahead, andassuming moderate and stable economic growth, we expect totalhousehold wealth to rise by almost 50% in the next five yearsfrom USD 223 trillion in 2012 to USD 330 trillion in 2017. Thenumber of millionaires worldwide is expected to increase byabout 18 million, reaching 46 million in 2017. We expect Chinato surpass Japan as the second wealthiest country in the world.However, the USA should remain on top of the wealth league,with USD 89 trillion by 2017. The Credit Suisse Global Wealth Report lays the foundationfor a long-running examination by the Credit Suisse ResearchInstitute of one of the crucial research areas in economics, anda vital driver of future megatrends. Moreover, it continues thethought leadership and proprietary research undertaken by theResearch Institute over the past three years.Hans-Ulrich MeisterChief Executive Officer Credit Suisse Private Banking &Chief Executive Officer Credit Suisse Switzerland
GLOBAL WEALTH REPORT 2012_4Global wealthoverviewThe Credit Suisse Global Wealth Report aims to provide the mostreliable and comprehensive data on global household wealth, coveringall components of wealth and spanning the entire wealth spectrum,from very wealthy individuals to the less well-off. Subdued economicgrowth and collapses in equity prices have made the past year achallenging one for wealth creation and preservation. In this chapter,we review important aspects of the recent economic environmentand highlight some of the topics discussed later in the report. Changes to household wealth between 880 billion) and China (USD 560 billion), which had mid-2011 and mid-2012 a relatively quiet time compared with recent years in which wealth growth in China has averaged 13% The economic uncertainties of the past year – par- per annum since 2000. The latest wealth estimates ticularly those affecting Eurozone countries – have indicate that by mid-2011, all regions (except cast a large shadow over household wealth. Eco- Africa) had fully recovered from the financial crisis; nomic recession in many countries, combined with however, Europe and India have now dropped back widespread equity price declines and relatively below the level achieved in 2007. subdued housing markets, has produced the worst environment for wealth creation since the Asset price changes outbreak of the financial crisis. As a consequence, total global household wealth fell by 5.2% to USD Financial assets and non-financial assets (e.g. real 223 trillion between mid-2011 and mid-2012, the estate) contributed roughly equal amounts to the first annual decline since the financial crisis of decline in gross household wealth, and both com- 2007–2008. However, prospects are not as ponents decreased in all regions of the world apart gloomy as this result might suggest because the from North America and China. The percentage overall drop is attributable to the appreciation of decline in financial assets was especially prominent the US dollar. Based on constant exchange rates, in India and Europe, although Africa and Latin PHOTO: KEYSTONE/CHROMORANGE/TIPSIMAGES GUIDO/ALBERTO ROSSI aggregate global household wealth actually rose America also registered drops of roughly 10%. In by about 1% over the last year – not an impressive some respects, the situation could have been much performance compared to recent years, but still worse. In the 12 months to mid-2012, equity prices better than expected, given the challenging eco- in many regions of the world fell substantially rela- nomic environment. tive to their levels in mid-2011. The extent of the Europe was responsible for USD 10.9 trillion of decline is evident from the data displayed in Figure the total global loss of USD 12.3 trillion (see Table 1, which shows that market capitalization fell in all 1). Even with constant exchange rates, total house- the G8 countries as well as in China and India, and hold wealth in Europe fell by about USD 1 trillion. that the decline exceeded 10% in half of these Asia-Pacific (excluding China and India) was the countries. While Italy tops the list with a 23% drop, other big regional loser, shedding USD 1.3 trillion greater declines were experienced in Finland, Ban- on the back of the dollar appreciation. Other losses gladesh, Austria, Romania, Spain and Israel. Mar- in Africa, India and the Latin American countries ket capitalization fell by more than 30% in Portugal were offset by modest gains in North America (USD and Ukraine, and by more than 40% in Argentina,
Table 1Changes in household wealth in 2011–2012 by regionSource: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 Total net wealth Change in total net wealth Change in financial assets Change in non-financial assets 2012 2011–12 2011–12 2011–12 2011–12 2011–12 2011–12 USD bn USD bn % USD bn % USD bn % Africa 2,393 -127 -5.0 -112 -8.1 -42 -3.0 Asia-Pacific 50,724 -1,311 -2.5 -298 -1.0 -938 -3.1 China 20,190 562 2.9 233 2.4 367 3.4 Europe 69,351 -10,882 -13.6 -6,237 -14.9 -6,480 -12.1 India 3,193 -699 -18.0 -139 -20.8 -586 -17.4 Latin America 8,696 -760 -8.0 -447 -10.4 -450 -6.9 North America 68,173 882 1.3 361 0.6 403 1.5 World 222,719 -12,336 -5.2 -6,640 -4.6 -7,728 -5.8
GLOBAL WEALTH REPORT 2012_6 Greece and Serbia. Relatively few countries rate movements reduced US dollar-denominated escaped reversals, although stock prices rose by global wealth by about 6%, which explains the dif- more than 15% in Thailand, Tunisia, Vietnam, Mex- ference between the 5% decline in aggregate ico and the Philippines, while Ireland rebounded global wealth denominated in current US dollars from its recent setbacks with a robust rise of 88%. and the 1% rise measured in constant dollars. Of House prices are another indicator (with a short course, exchange rate movements have a more time lag) of household wealth, primarily of the noticeable impact on the relative position of indi- non-financial kind. In global terms, house prices vidual countries in a global context. have been relatively flat, as suggested by the changes recorded for nine countries in Figure 1, Level and trends in household wealth which are confined to a range between –6% and +6% (data for Russia are unavailable). Elsewhere, The impact of these asset price changes and house prices rose by 8% in Poland and by 14% in exchange rate movements is examined in more Austria, while they declined by around 9% in Por- detail in the next chapter, which provides estimates tugal and Taiwan, by 14% in Ireland, and by more of the level and trend in total household wealth and than 40% in Malaysia. its principal components across regions and coun- tries since the year 2000. Chapter 3 pays special US dollar appreciation attention to the pattern of wealth holdings across the adult population, as captured in the global The last major factor affecting global wealth com- wealth pyramid, and summarizes year-on-year parisons is the change in exchange rates versus changes in the number of US dollar millionaires and the US dollar, which declined almost everywhere their countries of residence. between mid-2011 and mid-2012. The 14% depreciation of the euro roughly equates to the Special topics for 2012 world average, although Brazil, Hungary, India, Poland and Romania recorded declines greater The report this year features a detailed review of than 20%. Canada and the United Kingdom man- household debt, covering G7 countries since the aged to limit the depreciation to 6%, and China and 1980s and all countries in the world since the year Japan bucked the trend with a year-on-year appre- 2000. The analysis reveals many interesting find- ciation of about 2.5%, although the yuan has been ings that appear to have gone unnoticed. We also on a downtrend since early 2012, which means examine the link between household debt and the that the 12-month comparison for China may be sovereign debt of countries. The other special topic somewhat misleading. Taken together, exchange in 2012 focuses on inherited wealth. It looks inter alia at the degree to which evidence of inheritance varies across wealth levels and over time, and howFigure 1 the share of inherited and self-made wealth acrossPercentage change in market capitalization, house prices countries depends on factors such a savings rates,and USD exchange rate, 2011–2012 growth rates and life expectancy.Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 Looking ahead United States Our research has established that by the middle of 2011, household wealth in all regions (except United Kingdom Africa) had fully recovered from the 2007–08 finan- cial crisis. The prospects for Europe look less bright Russia because household wealth has suffered hits from several quarters. Equity markets have been dismal, Japan house prices have been stagnant, and depreciating Italy currencies have added to the overall gloom. Euro- zone countries, in particular, have tended to move India downwards in the wealth league tables, and resi- dents in these countries have tended to be replaced Germany in the higher wealth groups. History suggests that the combination of equity price falls and currency PHOTO: KEYSTONE/HERRGOTT RICARDO France depreciation affecting Europe over the last year are unlikely to be repeated to the same extent this year; China but the overall wealth outlook remains neutral at best, rather than positive. From a global viewpoint, Canada it is the emerging market giants – most especially China – which will continue to hold the key to -25 -20 -15 -10 -5 0 5 household wealth creation in the immediate future Market capitalization House prices USD exchange rate (as we outline in our chapter on forecasts).
GLOBAL WEALTH REPORT 2012_8Household wealth:A global portraitWealth is one of the pillars of the economic system – driving economicgrowth, the accumulation of capital, trends in consumption, asset prices,and specific industries such as healthcare and banking. Although the verytop wealth holders attract a great deal of attention, there is a shortage ofreliable data and research on the overall pattern of household wealth. Inthis chapter, we summarize the pattern of wealth ownership across regionsand countries, and analyze the core trends over time.
GLOBAL WEALTH REPORT 2012_9 The Credit Suisse Wealth Report aims to be the in the world. Figure 1 shows that by the middle of best available source of information on global 2011, global wealth had recovered from the 2007 household wealth, providing the most reliable financial crisis; at that time, total wealth matched or results and the most comprehensive coverage. We exceeded the pre-crisis levels in all regions except assemble data on household wealth from a variety Africa. During the past year, economic uncertainty of sources, and apply state-of-the-art techniques and exchange rate movements have reduced US to produce estimates of the level and pattern of dollar-denominated aggregate wealth everywhere household wealth across individual adults. Our except North America and China, and this decline analysis encompasses the whole spectrum of was sufficient to return India and Europe below the wealth holdings from rich to poor across all coun- 2007 peak. While Europe remains the region with tries and regions. The more extensive Credit Suisse the highest total wealth, its lead on North America is Wealth Databook that accompanies this report now just USD 1.2 trillion, the smallest gap since describes the methodology employed in greater Europe overtook North America in 2006. detail. This chapter outlines some of the key results Despite the setbacks in 2007 and more recently,PHOTO: ISTOCKPHOTO.COM/ESCOLUX and trends related to wealth levels. household wealth has grown strongly over the past decade, with the global aggregate doubling from Trends in global wealth the USD 113 trillion recorded at the start of the millennium. Even adjusting for the rise in the global We estimate that global household wealth in mid- population and for exchange rate fluctuations, net 2012 totaled USD 223 trillion based on current worth has increased by 38% since the year 2000, exchange rates, equivalent to USD 49,000 per adult equivalent to 2.7% growth per annum. The sepa-
GLOBAL WEALTH REPORT 2012_10Figure 1 rate regional series displayed in Figure 2 based onAggregate global wealth, 2000–2012 constant USD exchange rates reinforce the viewSource: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 that the underlying trends have been, and continue to be, broadly positive. They show that all regions 250 USD trn except Latin America experienced a downturn in 2007–08, and that – when exchange rate fluctua- tions are ignored – growth in wealth, both before 200 and after the crisis, has been uniformly positive, apart from the period 2000–02 in North America 150 and last year in Europe. Global wealth by country 100 The figure for average global wealth masks the considerable variation across countries and regions 50 (see Figure 3). The richest nations, with wealth per adult over USD 100,000, are found in North Amer- ica, Western Europe, and among the rich Asia- 0 Pacific and Middle Eastern countries. They are 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 headed by Switzerland, which in 2011 became the Africa India Latin America China Asia-Paci c North America Europe first country in which average wealth exceeded USD 500,000. Exchange rate fluctuations have reduced its wealth per adult from USD 540,000 inFigure 2 2011 to USD 470,000 in 2012; but this stillTotal wealth 2000–2012 at constant exchange rates, remains considerably higher than the level in Aus-by region tralia (USD 350,000) and Norway (USD 330,000),Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 which retain second and third places despite falls of about 10%. Close behind are a group of nations 100 USD trn, log scale with average wealth above USD 200,000, many of which have experienced double-digit depreciations against the US dollar, such as France, Sweden, Belgium, Denmark and Italy. Countries in the group which have not been adversely affected have moved up the rankings – most notably Japan to fourth place with wealth of USD 270,000 per adult 10 and the USA to seventh place with USD 260,000 per adult. Interestingly, the ranking by median wealth is slightly different, favoring countries with lower lev- els of wealth inequality. As was the case last year, Australia (USD 195,000) tops the table by a con- siderable margin, with Japan, Italy, Belgium, and 1 the UK in the band from USD 110,000 to 140,000, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 and Singapore and Switzerland with values around Europe North America China Latin America India Africa USD 90,000. The USA lags far behind with median wealth of just USD 55,000. Intermediate wealth In terms of wealth per adult, the set of richest countries has been very stable. During the past year, only Greece has dipped below the USD 100,000 threshold, although Spain and Cyprus are close to demotion with average wealth of USD 105,000 and USD 113,000 respectively. Greece joins other European Union (EU) countries (Portu- gal, Malta and Slovenia) at the top of the interme- diate wealth” group, with mean wealth ranging from USD 25,000 to USD 100,000. Recent EU entrants (Czech Republic, Estonia and Slovakia) are found lower down this band, but several others (Hungary, Poland, Lithuania and Romania) have been
GLOBAL WEALTH REPORT 2012_11Figure 3World wealth levels 2012Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012Wealth per adult (USD) Under USD 5,000 USD 5,000 to 25,000 USD 25,000 to 100,000 Over USD 100,000 No datademoted during the past year. The intermediate Wealth of regionswealth band also encompasses a number of MiddleEastern nations (Oman, Bahrain, Lebanon, and In mid-2012, Europe and North America had verySaudi Arabia) and several Latin American countries similar shares of total household wealth, 31.1%(Chile, Mexico, Uruguay and Costa Rica) consid- and 30.6% respectively. North America is theered to be emerging markets. Colombia has been region with the highest average wealth, butpromoted to the group, but Brazil has moved in the Europe’s bigger population makes up the differ-opposite direction, together with its BRICS col- ence. Figure 4 shows that the 23% share of wealthleague, South Africa. held in Asia-Pacific countries (excluding China and India) is very close to the population share of theFrontier wealth region. Elsewhere, the disparity between popula- tion and wealth becomes increasingly apparent.The frontier wealth” range from USD 5,000 to Despite making enormous strides in recent years,25,000 per adult covers the largest number of Chinese residents account for 21.5% of the adultcountries and most of the heavily populated ones, population of the world, yet only 9.1% of globalincluding China, Russia, Indonesia, Brazil, Paki- wealth. In Latin America, the ratio is similar: 8.4%stan, Philippines, Turkey, Egypt and Iran. The band to 3.9%; but in Africa and India, the populationalso contains many transition nations outside the share exceeds the wealth share by a factor of ten.EU (Albania, Armenia, Azerbaijan, Bosnia, Georgia,Serbia, Kazakhstan and Mongolia), most of Latin Trends in wealth per adult and itsAmerica (Argentina, Ecuador, El Salvador, Panama, componentsParaguay, Peru and Venezuela), and many coun-tries bordering the Mediterranean (Algeria, Jordan, As Figure 5 shows, average household net worthLibya, Morocco, Syria and Tunisia). South Africa is trended upwards from 2000 until the crisis in 2007,now positioned alongside other leading sub-Saha- then fell by approximately 10% before recovering inran nations in this group: Botswana, Equatorial 2011 to slightly above the pre-crisis level. FurtherGuinea, Namibia and Swaziland. setbacks this year have pushed wealth per adult The final category with wealth below USD 5,000 back below the previous peak. However, exchangeremains heavily concentrated in Africa, although the rate movements account for much of the year-on-overall geographical composition shifted this year, year variation. Using constant USD exchange rateswhen India dropped down to join other major Asian yields a smoother time trend and a single signifi-nations (Bangladesh, Cambodia, Laos, Nepal, Sri cant downturn in 2008, after which point the recov-Lanka and Vietnam). Belarus, Moldova and Ukraine ery has continued more or less unabated.are three countries bordering the EU, which also The time series for the financial and nonfinan-languish in the middle of this wealth range. cial components of wealth closely follow the pat-
GLOBAL WEALTH REPORT 2012_12Figure 4 tern for net worth, and both have now returnedWealth and population by region, 2012 below the 2007 peak. At the start of the millen-Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 nium, financial assets accounted for well over half of the household portfolio, but the share declined until 2008, at which point the global wealth portfo- Europe lio was equally split between financial and non- North America financial assets (mostly property). In the period since 2008, the balance has again tipped slightly towards financial assets. On the liabilities side of the household balance China sheet, average debt rose by 80% between 2000 and 2007, and subsequently leveled out. It now Latin America amounts to USD 8,600 per adult, about 7% lower than it was the same time a year ago. Expressed as India a proportion of household assets, average debt has moved in a narrow range, rising over the period, but Africa never exploding. The composition of household portfolios varies 0 5 10 15 20 25 30 widely and systematically across countries. The Share of adult population in % Share of total wealth in % most persistent feature is the rise in the relative importance of both financial assets and liabilities with the level of development. For instance, finan-Figure 5 cial assets account for 43.1% of gross assets inGlobal trends in wealth per adult and its components Europe and 67.1% in North America, but justSource: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 15.9% of gross assets in India. Household debt as a percentage of gross assets is 16% in Europe and50000 USD per adult 18.1% in North America, but only 3.7% in India and 8.7% in Africa. There is also variation in port-40000 folios unrelated to the level of development. Some developed countries, like Italy, have unusually low liabilities (10.0% of gross assets), while others30000 have surprisingly high debt, like Denmark (33.7% of gross assets). In addition, the mix of financial20 000 assets varies greatly, reflecting national differences in financial structure. The share of equities in total financial assets, for example, ranges from 43.4%10000 in the USA, down to just 20.1% and 6.5% in Ger- many and Japan respectively. 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Changes to household wealth from Net worth Financial wealth Debt Net worth at constant exchange rates mid-2011 to mid-2012 The adverse global economic climate and the USD appreciation that occurred during the year until mid-2012 meant that household wealth rose by more than USD 100 billion in only four countries: the USA (USD 1.3 trillion), China (USD 560 bil- lion), Japan (USD 370 billion) and Colombia (USD 100 billion). Figure 6 shows that Eurozone mem- bers suffered the largest losses, led by France (USD 2.2 trillion), Italy (USD 2.1 trillion), Germany (USD 1.9 trillion) and Spain (USD 870 billion). These losses were exacerbated by the unfavorable Notes on concepts and methods: Net worth or “wealth” is defined as the value of financial assets euro-dollar exchange rate movement, but even in plus real assets (principally housing) owned by households, less their debts. This corresponds to the balance sheet that a household might draw up, listing the items which are owned and their net value if euro terms, wealth declined by EUR 50 billion in sold. Personal pension fund assets are included in principle, but not entitlements to state pensions. Germany, EUR 148 billion in France, EUR 177 bil- Human capital is excluded altogether, along with assets and debts owned by the state (which cannot easily be assigned to individuals). lion in Spain and EUR 286 billion in Italy. Sizeable For convenience, we disregard the relatively small amount of wealth owned by children on their own USD wealth reductions were also recorded in the account, and frame our results in terms of the global adult population, which totaled 4.6 billion in 2012. The “Asia-Pacific” region excludes China and India, which are treated separately due to the size of their UK (USD 720 billion), India (USD 700 billion), populations. Australia (USD 600 billion), Brazil (USD 530 bil- Data for 2011 and 2012 refer to mid-year (end-June) estimates; the figures for earlier years indicate year-end values. lion), Canada (USD 440 billion) and Switzerland (USD 410 billion).
GLOBAL WEALTH REPORT 2012_13The largest percentage gains and losses generate Figure 6a slightly different list. A steady USD exchange Change in total wealth 2011–2012: Biggest winnersrate, combined with an 11% improvement in mar- and losers (USD bn)ket capitalization, helped Colombia to top the coun- Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012try rankings with a 16% rise in household wealth.Algeria, Hong Kong, Peru and Uruguay also United Statesrecorded gains of more than 5%. The downside is Chinamore evident, especially in Eurozone countries, Japan Colombiawhere double-digit losses were recorded every- Netherlandswhere (see Figure 7). Other sizeable declines were Belgiumrecorded for Russia (–13%), Mexico (–14%), SwedenSouth Africa (–15%) and India (–18%), while East- Taiwanern Europe had a very poor year, led by the Czech MexicoRepublic and Poland (both with –18%), Hungary Switzerland(–25%) and Romania (–36%). Canada BrazilDistribution of wealth across individuals Australia India United KingdomIf we are to understand how global wealth is spread Spainacross households and individuals – rather than Germanyregions or countries – we need information on the Italydistribution of wealth within countries. For this Francestudy, we combine data on the levels of household -2500 -2000 -1500 -1000 -500 0 500 1000 1500 2000wealth across countries and patterns of householdwealth within countries in order to estimate theglobal distribution of wealth. Figure 7 Our estimates indicate that once debts have Percentage change in total wealth 2011–2012:been subtracted, an adult requires only USD 3,700 Biggest winners and losersin assets to be in the wealthiest half of world citi- Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012zens. However, a person needs at least USD71,000 to belong to the top 10% of global wealthholders and USD 710,000 to be a member of the Colombiatop 1%. Taken together, the bottom half of the Algeriaglobal population possess barely 1% of total China United Stateswealth, although wealth is growing fast for some Japanmembers of this segment. In sharp contrast, the Greecerichest 10% own 86% of the world’s wealth, with Francethe top 1% alone accounting for 46% of global Irelandassets. South Africa SwedenRegional comparisons Italy FinlandThe pattern of regional representation in global Czech Republic Polandwealth deciles (i.e. population tenths) is shown in PortugalFigure 8. The most striking feature is perhaps the Indiacomparison between China and India. China has Spainvery few representatives at the bottom of the global Hungarywealth distribution and relatively few at the top, but Romaniadominates the upper middle section, with 40% of -40 -30 -20 -10 0 10 20its population in deciles 6–9. The sizeable presenceof China in this section reflects not only its popula-tion size and its growing average wealth, but alsowealth inequality which, despite recent increases,remains modest by the standards of the developingworld. China’s position in the global picture hasshifted towards the right in the past decade due toits strong record of growth, rising asset values, andcurrency appreciation. China now has more peoplein the top 10% of global wealth holders than anyother country except for the USA and Japan, hav-ing moved into third place in the rankings by over-taking Italy and Germany. In contrast, residents of
GLOBAL WEALTH REPORT 2012_14Figure 8Regional composition of global wealth distribution 2012Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012100 % North America 90 % Latin America 80 % 70 % Africa Europe 60 % China 50 % India 40 % 30 % 20 % 10 % 0% 1 2 3 4 5 6 7 8 9 10 Decile India are heavily concentrated in the lower wealth Latin America is another region whose wealth dis- strata, accounting for a quarter of people in the tribution closely mimics the global pattern, with bottom half of the distribution. However, its extreme individuals fairly evenly spread across the wealth wealth inequality and immense population means deciles. North America and Europe are skewed that India also has a significant number of members much more towards the high end, together in the top wealth echelons. accounting for 60% of individuals in the top 10%, As Figure 8 shows, residents of Asia-Pacific and an even higher percentage of the top percen- nations (excluding China and India) are fairly evenly tile. Europe alone accounts for 36% of members of spread across the global wealth spectrum. How- the top wealth decile, a proportion that rose consid- ever, this uniformity masks a substantial degree of erably over the past decade as the euro appreci- polarization. Members of high-income Asian coun- ated against the US dollar, but has declined a little tries, such as Japan, Singapore and Hong Kong, during the past 12 months. are heavily concentrated at the top end: half of all adults in high-income Asian countries are placed in Year-on-year changes in membership of top the top global wealth decile. In contrast, residents wealth decile by country of lower-income countries in Asia, such as Indone- sia, Bangladesh, Pakistan and Vietnam, tend to be We estimate that more than six million residents in found much lower down in the wealth distribution. both Japan and China joined the top global decile, In fact, when high-income countries are excluded along with around half a million new members from the Asia-Pacific group, the wealth pattern each in Chile, Colombia and Hong Kong (see within the remaining countries resembles that of Table 1). They displaced about six million mem- India, with both regional groupings contributing bers of the top decile who were domiciled in Ger- about one quarter of the bottom half of wealth many, Italy and Spain, and nearly five million adults holders. Africa is even more concentrated at the resident in the major developing economies of bottom end. Half of all African adults are found in Brazil, South Africa, India, Mexico and Taiwan. To the bottom two global wealth deciles. At the same belong to the top percentile (i.e. top 1%) of the time, wealth inequality within and across countries global wealth distribution required USD 710,000 in Africa is so high that some individuals are found in mid-2012; hence, the pattern of residence among the top 10% of global wealth holders, and across countries is expected to be similar to that even among the top 1%. of millionaires. Our results indicate that almost
GLOBAL WEALTH REPORT 2012_15Table 1Winners and losers in the global wealth distributionSource: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 Adults (thousand) in global top 10% Adults (thousand) in global top 1% Country 2011 2012 Change Country 2011 2012 Change Japan 68,894 75,525 6,631 USA 12,584 16,376 3,792 China 28,950 34,996 6,046 Japan 5,642 6,590 948 UK 28,453 29,321 868 Chile 44 66 22 Chile 739 1,416 677 Peru 10 28 18 Denmark 1,641 2,190 549 Morocco 3 21 18 Colombia 1,331 1,846 515 Colombia 60 75 15 Hong Kong 1,174 1,654 480 Philippines 28 38 10 Korea 7,302 7,611 309 UAE 65 70 5 Canada 13,315 13,621 306 Hong Kong 133 138 5 Netherlands 5,727 6,010 283 Thailand 26 30 4 Poland 1,551 1,334 -217 Taiwan 553 404 -149 Taiwan 6,714 6,384 -330 Spain 671 517 -154 Israel 1,862 1,500 -362 Brazil 507 352 -155 Mexico 5,651 5,221 -430 Belgium 634 461 -173 India 4,138 3,616 -522 Canada 1,603 1,428 -175 South Africa 2,449 1,586 -863 Denmark 426 201 -225 Italy 32,184 30,684 -1,500 Australia 1,861 1,571 -290 Germany 29,880 28,143 -1,737 France 3,982 3,540 -442 Brazil 9,322 6,656 -2,666 Germany 2,964 2,455 -509 Spain 16,361 13,640 -2,721 Italy 2,778 2,073 -705 World 451,795 459,238 7,443 World 45,185 45,938 753four million US residents moved into the top global covering all regions and countries, and all parts ofwealth percentile, together with nearly one million the wealth spectrum from rich to poor. Despite aJapanese. As expected, they replaced many resi- decade of negative real returns on equities, severaldents of Eurozone countries: Italy (-705,000), equity bear markets, and the collapse of housingGermany (-509,000), France (-442,000), Bel- bubbles, we find that total global wealth has dou-gium (-173,000) and Spain (-154,000). Australia, bled since 2000. Strong economic growth and ris-Denmark, Canada, Brazil and Taiwan between ing population levels in emerging nations are impor-them shed about another million members. tant drivers of this trend. The list of top ten countries in the wealth-per-World wealth spectrum adult league table includes many smaller, dynamic economies – Switzerland, Norway, Luxembourg,Wealth is one of the key components of the eco- Singapore and Sweden – as well as Australia andnomic system. It is valued as a source of finance G7 members, Japan, France, the USA and the UK.for future consumption, especially in retirement, Notable cases of emerging wealth are found inand for reducing vulnerability to shocks such as Chile, Columbia, the Czech Republic, Lebanon, Slo-unemployment, ill health or natural disasters. venia and Uruguay, while frontier” wealth is evidentWealth also enhances opportunities for informal in Egypt, Indonesia, Malaysia, Tunisia and Vietnam.sector and entrepreneurial activities, when used For a number of reasons, wealth varies greatlyeither directly or as collateral for loans. These func- across individuals. Our estimates suggest that thetions are less important in countries that have gen- lower half of the global population owns barely 1%erous state pensions, adequate social safety nets, of global wealth, while the richest 10% of adultsgood public healthcare, high quality public educa- own 86% of all wealth, and the top 1% accounttion and well-developed business finance. Con- for 46% of the total. Over time, this may change,versely, the need to acquire personal assets is par- particularly if enough low-wealth countries experi-ticularly compelling and urgent in countries that ence rapid growth, and if China and India fulfillhave rudimentary social insurance schemes and their potential to be major catalysts of global meta-restricted options for business finance, as is the morphosis. However, any trend towards equaliza-case in much of the developing world. tion is likely to be slow. In the next section, we look The Credit Suisse Wealth Report is designed to at the pattern of wealth holdings across individualsprovide a comprehensive portrait of world wealth, in more detail.
GLOBAL WEALTH REPORT 2012_16The globalwealth pyramidThis chapter looks in more detail at the pattern of wealth ownership across alladults in the world, through the lens of the “wealth pyramid”. This allows us toanalyze not only the top echelons of wealth holders, but also the “middle” and“bottom” sections of the wealth pyramid, which other studies tend to ignore. Many factors contribute to the disparity in personal tion – have wealth below USD 10,000, and a fur- wealth across individuals. At one end of the spec- ther one billion (23% of the adult population) are trum, there are individuals at early stages of their placed in the USD 10,000–100,000 range. While career who have had little chance and little motiva- the average wealth holding is modest in the base tion to accumulate assets, those who have suffered and middle segments of the pyramid, total wealth business setbacks or personal misfortunes, and amounts to USD 39 trillion, underlining the poten- those who simply live in parts of the world where tial for new consumer trends products and for the opportunities for wealth creation are severely lim- development of financial services targeted at this ited. At the other end of the spectrum, there are often neglected segment. individuals who have acquired a large fortune The remaining 373 million adults (8% of the through a combination of talent, hard work or sim- world) have assets exceeding USD 100,000. This ply being in the right place at the right time. includes 29 million US dollar millionaires, a group which contains less than 1% of the world’s adult The wealth pyramid population, yet collectively owns nearly 40% of global household wealth. Amongst this group, we The wealth pyramid shown in Figure 1 captures estimate that 84,500 individuals are worth more these wealth differences in striking detail. It has a than USD 50 million, and 29,000 are worth over large base of low wealth holders, with the upper USD 100 million. tiers occupied by progressively fewer people. The The composition of the wealth pyramid in 2012 pyramid data are derived from our estimates for is broadly similar to that of the previous year, except mid-2012 and it thus provides a snapshot of the for the fact that the overall reduction in total wealth wealth pattern across the adult population. While increases the percentage of adults in the base level the overall features tend to change slowly over from 67.6% to 69.3% and reduces the relevant time, the various strata are very fluid, and the indi- population share higher up the pyramid by a corre- PHOTO: KEYSTONE/IMAGEBROKER/FLORIAN KOPP vidual occupants are highly mobile, seldom remain- sponding amount. The respective wealth shares are ing in the same place over the course of their life- virtually unchanged. time. For this reason, while the top stratum of the pyramid remains the principal driver of private asset The base of the pyramid flows and investment trends, the emerging wealth holders in the middle and base segments are rightly The various strata of the wealth pyramid have dis- seen as sources of great dynamism, triggering new tinctive characteristics. Although members of the trends in consumption and industrial change. base level are spread widely across all regions, rep- In 2012, we estimate that 3.2 billion individuals resentation in India and Africa is disproportionately – more than two-thirds of the global adult popula- high, while Europe and North America are corre-
GLOBAL WEALTH REPORT 2012_18Figure 1 29 m (0.6%)The global wealth pyramidSource: James Davies, Rodrigo Lluberas and > USD 1 m USD 87.5 trn (39.3%)Anthony Shorrocks, Credit Suisse Global WealthDatabook 2012 344 m USD 100 ,000 to 1 m (7.5%) USD 95.9 trn (43.1%) 1,035 m USD 10,000 to 100,000 (22.5%) USD 32.1 trn (14.4%) 3,184 m < USD 10,000 (69.3%) USD 7.3 trn (3.3%) Total wealthWealth range (percent of world) Number of adults (percent of world population) spondingly underrepresented (see Figure 2). The is close to the global average for all wealth levels, base tier has the most even distribution across and the total wealth of USD 32 trillion gives this regions and countries, but it is also the most het- segment considerable economic weight. The erogeneous, spanning a wide range of family cir- regional composition of this tier most closely cor- cumstances. In developed countries, only about responds to the global pattern, although India and 30% of the population fall into this category, and Africa are underrepresented. The comparison of for most of these individuals, membership is a tran- China and India is particularly interesting. India is sient or life cycle phenomenon associated with host to just 3% of the global middle class, and the youth, old age, or periods of unemployment. In share has been relatively stagnant in recent years. contrast, more than 90% of the adult population in In contrast, China’s share has been growing fast India and Africa are located within this band. In and now accounts for over one-third of members, many low-income African countries, the percent- ten times higher than India’s. age of the population is close to 100%. Thus, for many residents of low-income countries, lifetime High wealth segment of the pyramid membership of the base tier is the norm rather than the exception. However, lower living costs mean The regional composition changes significantly that the upper limit of USD 10,000 is often suffi- when it comes to the 373 million adults worldwide cient to assure a reasonable standard of living. who make up the “high” segment of the wealth While bottom-of-the-pyramid countries have pyramid – those with a net worth above USD limited wealth, it often grows at a fast pace. In 100,000. North America, Europe and the Asia- India, for example, wealth is skewed towards the Pacific region together account for 89% of the bottom of the wealth pyramid, yet it has tripled global membership of this group, with Europe alone since 2000. Indonesia has also seen dramatic home to 141 million members (38% of the total). growth, and aggregate wealth in Latin America is This compares with about 2.4 million adult mem- now USD 8.7 trillion, compared to USD 3.4 trillion bers in India (0.6% of the global total) and a similar in 2000. In contrast, while North Americans domi- number in Africa. nate the top of the wealth pyramid, wealth in the The number of people in a given country with USA has grown more modestly, from USD 39.5 wealth above USD 100,000 depends on three fac- trillion in 2000 to USD 62 trillion today. tors: population size, the average wealth level, and wealth inequality within the country concerned. In Middle class wealth 2012, only 15 countries have more than 1% of the global membership. The USA leads with 21% of The one billion adults located in the USD 10,000– the total. In this instance, the three factors rein- 100,000 range are the middle class in the global force each other: a large population, combined with distribution of wealth. The average wealth holding high mean wealth and an unequal wealth distribu-
GLOBAL WEALTH REPORT 2012_19tion. Japan is a strong second and is currently the Figure 2only country that challenges the hegemony of the Regional membership of global wealth strataUSA in the top wealth-holder rankings. Although its Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012relative position has declined over the past coupleof decades due to the lackluster performance of its > USD 1 millionequity and housing markets, Japan has 18% ofindividuals with wealth above USD 100,000, a USD 100,000couple of points more than a year ago. to 1 million The most populous EU countries – Italy, the USD 10,000UK, Germany, and France – each contribute to 100,0006%–8% to the high wealth segment, and eachcountry has experienced a small decline in its < USD 10,000membership share during the year. For manyyears, these countries have occupied positions All levelsthree to six in the global rankings, but this yearChina edged France out of sixth place, a dramatic 0 10 20 30 40 50 60 70 80 90 100 Percentage of wealth group in regionimprovement from the situation in 2000, whenChina’s representation in the top wealth groups India Africa Latin America China Europe North Americawas too small to register. Brazil, Korea and Taiwanare other emerging market economies with atleast four million residents with a net worth above Figure 3USD 100,000. Mexico accounted for more than Dollar millionaires by country of residence1% of the group in 2011, but has dropped below Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012this benchmark this year. Netherlands 1%Top of the pyramid Spain 1% Sweden 1%A different pattern of membership is again evident Switzerland 2%among the world’s millionaires at the top of the Canada 3%pyramid (see Figure 3). Compared to individualswith wealth above USD 100,000, the proportion of Australia 3%members from the United States almost doubles to China 3% USA 39%39%, and the shares of most of the other coun- Italy 4%tries move downwards. There are exceptions,however. France moves up to third place in the Germanyrankings, and Sweden and Switzerland both join 5%the group of countries with more than 1% of globalmillionaires. UK 6%Changing membership of the “millionairegroup” France 8%Changes to wealth levels since mid-2011 haveaffected the pattern of wealth distribution. Theoverall decline in average wealth has raised theproportion of adults with wealth below USD Japan 13% Rest of world 11%10,000 from 67.6% in mid-2011 to 69.3% inmid-2012, and reduced the number of millionairesby slightly more than one million (see Table 1).There were 962,000 new millionaires in the UnitedStates and 460,000 in Japan, but no significantincrease in numbers elsewhere. However, Europeshed almost 1.8 million US dollar millionaires, mostnotably in Italy (–374,000), France (–322,000),Germany (–290,000), Denmark (–179,000),Sweden (–142,000) and Spain (–87,000). Austra-lia, Canada, Brazil and Taiwan are the other coun-tries in the group of the top ten losers. The losseswere sufficient to drop Brazil, Denmark and Taiwan(along with Belgium) from the list of countries withmore than 1% of the total number of millionairesworldwide.
GLOBAL WEALTH REPORT 2012_20 High net worth individuals restored this year, with 11.8 million residents (42% of the total) in North America and 9.2 million (32%) To estimate the pattern of wealth holdings above in Europe. Asia-Pacific countries excluding China USD 1 million requires a high degree of ingenuity and India have 5.7 million members (20%), and we because at high wealth levels, the usual sources of estimate that there are currently a fraction under wealth data – official statistics and sample surveys one million HNW individuals in China (3.4% of the – become increasingly incomplete and unreliable. global total). The remaining 753,000 HNW indi- We overcome this deficiency by exploiting well- viduals (2.6% of the total) reside in India, Africa or known statistical regularities in the upper parts of Latin America. the wealth distribution to ensure that the top wealth tail is consistent with the annual Forbes tally of Ultra high net worth individuals global billionaires and similar “rich list” data pub- lished elsewhere. This produces plausible esti- Our estimates suggest that worldwide there are mates of the global pattern of asset holdings in the 84,500 UHNW individuals, defined here as those high net worth (HNW) category from USD 1 million with net assets exceeding USD 50 million. Of these, to USD 50 million, and in the ultra high net worth 29,300 are worth at least USD 100 million and (UHNW) range from USD 50 million upwards. 2,700 have assets above USD 500 million. North While the base of the wealth pyramid is occu- America dominates the regional rankings, with pied by people from all countries of the world at 40,000 UHNW residents (47%), while Europe has various stages of their life cycles, HNW and UHNW 22,000 individuals (26%), and 12,800 (15%) reside individuals are heavily concentrated in particular in Asia-Pacific countries, excluding China and India. regions and countries, and tend to share a similar In terms of individual countries, the USA leads lifestyle, participating in the same global markets by a huge margin with 37,950 UHNW individuals, for high coupon consumption items, even when equivalent to 45% of the group (see Figure 5). The they reside on different continents. The wealth recent fortunes created in China have propelled it portfolios of individuals are also likely to be similar, into second place with 4,700 representatives dominated by financial assets and, in particular, (5.6% of the global total), followed by Germany equity holdings in public companies traded in inter- (4,000), Japan (3,400), the United Kingdom national markets. For these reasons, using official (3,200) and Switzerland (3,050). Numbers in other exchange rates to value assets is more appropriate BRIC countries are also rising fast, with 1,950 than using local price levels. members in Russia, 1,550 in India and 1,500 in We estimate that there were 28.5 million HNW Brazil, and strong showings are evident in Taiwan individuals with wealth between USD 1 million and (1,200), Hong Kong (1,100) and Turkey (1,000). USD 50 million in mid-2012, of whom the vast Although there is very little comparable data on majority (25.6 million) fall in the USD 1–5 million the past, it is almost certain that the number of range (see Figure 4). One year ago, Europe over- UHNW individuals is considerably greater than it was took North America as the region with the greatest a decade ago. The overall growth in asset values number of HNW individuals, but tradition has been accounts for part of the increase, together with theTable 1Changes in the number of millionaires by country, 2011–2012Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 Main winners Main losers Country Adults (thousand) with wealth Country Adults (thousand) with wealth above USD 1 m above USD 1 m 2011 2012 Change 2011 2012 Change USA 10,061 11,023 962 Italy 1,544 1,170 -374 Japan 3,121 3,581 460 France 2,606 2,284 -322 Peru 4 18 14 Germany 1,753 1,463 -290 Chile 28 42 14 Denmark 296 117 -179 Morocco 1 14 13 Australia 1,079 905 -174 Colombia 37 46 9 Sweden 485 343 -142 Philippines 18 25 7 Canada 940 842 -98 Thailand 17 20 3 Brazil 319 227 -92 UAE 40 43 3 Taiwan 343 253 -90 Hong Kong 89 92 3 Spain 400 313 -87 World 29,674 28,640 -1,034 World 29,674 28,640 -1,034
GLOBAL WEALTH REPORT 2012_21appreciation of currencies against the US dollar over Figure 4much of the period. However, it also appears that, The apex of the pyramidnotwithstanding the credit crisis and the more recent Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012setbacks, the past decade has been especially con-ducive to the establishment of large fortunes. > USD 50 m 84,500Changing fortunes USD 10 to 50 m 928,000Wealth is often seen in terms of a pyramid, with USD 5 to 10 m 1,921,000millionaires on top and poorer people at the base.Many commentaries on wealth focus exclusively onthe top part of the pyramid, which is unfortunatebecause the middle and base segments accountfor about USD 40 trillion of global household USD 1 to 5 m 25,613,500wealth, and satisfying the needs of the owners ofthese assets is likely to drive new trends in con-sumption, industry and finance. Wealth mobilityover time also means that many of the future suc- Wealth Numbercessful entrepreneurs and investors are currently range of adultslocated in the lower wealth strata. China, Taiwan,Korea, and Brazil are countries that are already ris-ing quickly through this part of the wealth pyramid,with Indonesia close behind and India growing fastfrom a low starting point. At the same time, the ultra wealthy top-of-the-pyramid segment will continue to be the strongdriver of private asset flows and investment trends.Our figures for mid-2012 indicate that there arenearly 30 million HNW individuals, with almost onemillion located in China and 5.7 million residing inAsia-Pacific countries other than China and India. At the top of the pyramid, there are 84,500UHNW individuals with net worth exceeding USD50 million. The recent fortunes created in Chinalead us to estimate that 4,700 Chinese individuals(5.6% of the global total) now belong to the UHNWgroup, together with a similar number in Russia,India and Brazil (taken together).Figure 5Ultra high net worth individuals 2012: Selected countriesSource: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2012 USA China Germany Japan United Kingdom Switzerland France Canada Russia Italy Australia India USD 50 m – 100 m Brazil USD 100 m – 500 m Taiwan USD 500 m – 1 bn Hong Kong > USD 1 bn Korea Turkey Indonesia 0 5000 10000 15000 20000 25000 30000 35000 40000