Driving global wealth_may2011

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The trend of global wealth flow

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Driving global wealth_may2011

  1. 1. Driving Global WealthMapping ultra high net worth individuals around the globe in association with:
  2. 2. Table of Contents Key findings 3 Introduction: Emerging Wealth Takes Over 4 The Lingering Impact of the Global Downturn 5 Emerging Wealth from Emerging Markets 6 Managing Family Involvement 8 Creating a Philanthropic Legacy 11 Finding Success in Public Service 13 Global Citizens Who Stay Put 15 Conclusion: Emerging Wealth, Emerging Markets, Emerging Opportunities 16 Methodology16 Appendix A: Ultra High Net Worth Individuals by Country 17 Appendix B: Research Definitions 29© Copyright Forbes 2011 2
  3. 3. he last few years have been historic for wealthy individuals—not so much in their importance but in how they’ve changed some of the attitudes and characteristics of this unique investment sector. The global credit crisis had an impact on all levels of society, including the very wealthy, that saw gains they had made disappear in the sudden market volatility. And while signs of recovery appeared during the past year, the wealthy, as everyone else, have been taking a more guarded approach to risk. At the same time, entering the second decade of the This study looks at the characteristics of UHNWIs in 21st century, the balance of global wealth has begun to a dozen global markets: Brazil, China, France, Germany, shift from traditional western economies to the newer Hong Kong, India, Mexico, the Middle East, Russia, emerging markets. The unprecedented growth of the Singapore, the U.K., and the U.S. Analysis was conducted Chinese economy, the expansion of India as a repository on ten different criteria, including: for innovation, and the ongoing progress of markets in • ource of wealth: Is the wealthy individual self-made, S Russia, Brazil and other developing nations, has led to or did he or she inherit wealth? this swing in the nature of the world’s richest individu- als and families. • Company ownership: Is the individual’s company In fact, our study suggests that the center of growth for private or publicly held? UHNWIs has shifted eastward. While the U.S. still has • Family: Does the individual have children or other the greatest number of UHNWIs, China, Russia and India relatives involved in his or her business? have overtaken Western Europe in the number of billion- • Employment: Is the individual still involved in the aires they produce. This marks a fundamental shift in the venture, retired, or a full-time investor? demographics of the world’s ultra-rich, and this could have an impact on spending and investing in the future. • Net worth: What is the range of the net worth of the Simply put, it is not just the number of wealthy indi- individuals being analyzed? viduals in these emerging markets, but how money is • itizenship and residence: Does the individual hold C flowing into these areas from around the globe. As they citizenship and residence in the same country or in dif- look for new investing opportunities, UHNWIs saw that ferent countries? these emerging markets were less affected by the 2008-09 downturn than were funds and investments in the U.S. and • Political involvement: How involved is the individual Europe. Today, they are adding these opportunities to their in national or local politics? wealth management portfolios. • Charitable foundation: Does the individual fund or To gain a greater understanding of the characteristics run his or her own charitable foundation, or does the of ultra high net worth individuals (UHNWIs), and how individual otherwise make philanthropy and giving a this investment segment is developing, Forbes Insights, large part of his or her life? in association with Societe Generale Private Banking, • ge: How old is the individual? A conducted an in-depth analysis of the world’s wealthi- est individuals. This exclusive data is derived from Forbes • ender: Is the individual male or female? G Magazine’s database of the world’s wealthiest people, look- ing at both people who made the “billionaire’s” list in 2010, as well as other UHNWIs.© Copyright Forbes 2011 3
  4. 4. Key Findings Forbes Insights, in association with Societe Generale Private Banking, examined the unique characteristics of ultra high net worth individuals (UHNWIs) in a dozen countries. The analysis is based on exclusive data from Forbes Magazine’s database of the world’s wealthiest people. The minimum net worth of the individuals studied was US$1 billion, with three exceptions: India ($500 million minimum), China ($425 million minimum), and Singapore ($190 million minimum). Key findings from this analysis include: • hile recovery seems to have come quickly to many UHNWIs, there are still lingering effects from the 2008-09 W global downturn. In particular, the impact has been on some of their investing attitudes and actions. Based on interviews and conversations with UHNWIs, they appear to have reduced their risk exposure, but have significant concerns about the possible impact of inflation over the coming years. In addition, many are revising their portfolios with greater investment in emerging markets such as China and the Asia Pacific region, where they believe there is less potential volatility. Finally, for some UHNWIs, the post-downturn timeframe has been an opportunity to review their advisor relationships. • he greatest area of UHNWI growth has been in the world’s emerging economies, particularly the so-called BRIC T nations of Brazil, Russia, China, and India. Today, both China and Russia have more than 100 billionaires in their ranks, putting them second and third behind the U.S. But UHNWIs in these emerging markets are different from those elsewhere in the world. They are younger; the average age of the UHNWI in Russia is just 49 and in China it is 50. They are predominantly self-made, having been responsible for creating their own wealth. They remain involved in their businesses. But they are still determining what they will do with their wealth, trailing other markets in areas such as philanthropy, for example. • here are extremely strong family links among the UHNWIs studied. This is a global phenomenon present in nearly all T markets, with a few notable exceptions such as Russia. In many societies, keeping family close is a priority, as they have their children and other family members involved in their businesses. Still, as generations pass, some conflicts can arise, particularly when investments are managed by a family office. • hilanthropy and charity remain priorities for many UHNWIs as they look for ways to create a more lasting P legacy and have a greater impact on society. In three quarters of the markets studied, more than 40% of the UHNWIs fund their own charitable foundation, or run a charitable foundation founded or started by other family members. Yet this is not yet universal. China remains a significant outlier, as only 7% of UHNWIs have foundations. But efforts are underway to encourage greater giving and philanthropy from the emerging Chinese billionaires. • aving made their marks in the business world, some UHNWIs see their next steps as shaping policy and debate H in the public sector. Tracking the political activity of the world’s richest people is difficult. In some nations such as the U.S. or India, many UHNWIs individuals are open in their support of certain political causes, and some billionaires have turned from business to politics. But elsewhere in the world (such as in Europe), UHNW individuals have been less open in their political involvement, either not being involved or keeping their positions unknown. • espite being global citizens, many UHNWI maintain citizenship and residence in the same country. The figure is D over 90% for most markets studied. The biggest outlier is Hong Kong—still maintaining its image as a haven for global wealth—where 28% of the UHNW individuals studied hold citizenship and residence in different countries.© Copyright Forbes 2011 4
  5. 5. The Lingering Impact of the Global Downturn Nobody was untouched by the global recession of 2008- “Our advisors have been warning us about the risk of 09, and the effect of the downturn lingered into 2010 for inflation,” said a second-generation Europe-based manu- some UHNWIs. Still, the overall impact wasn’t just related facturer. “It makes sense to prepare for it.” While he would to the value of portfolios. Certainly those were affected, not disclose his specific investing plan, he did allude to but, for many UNHWIs, the biggest shift may have been moving away from the dollar. related to their investing attitudes and actions. Based on conversations and interviews with UHNWIs Looking at developing nations across the globe, as well as with some of their advisors, As they assess their investment portfolios, some of the many of the world’s wealthiest were stung by the down- UHNWIs interviewed are examining putting a greater turn, but not to the same extent as other investors. (Most share of their capital into emerging markets, particularly in of these interviews were conducted on the condition that the Asia Pacific area. While investments in emerging mar- they would be used for background and that information kets also fell during the economic downturn, they were not not be attributable to the individual.) In the words of as volatile as those in developed markets, and they recov- a U.S.-based technology investor: “The thing to con- ered more quickly, said one interviewee. sider is that in this downturn, it wasn’t just a few assets, Noted a U.K.-based investment advisor for UHNWIs, it was nearly all asset classes. So everyone got burned “The emerging markets as a whole are growing at a 7 per- nearly equally.” cent clip. The developed countries have enormous debt Still, the recession has influenced how some of these whereas the emerging nations have healthy balance sheets.” UHNWIs are investing today, and how they interact with The advisor added that he has recommended building their advisors, as the anecdotes below describe: portfolios that “decouple the emerging world with the developed world. I believe that’s going to play a role in A speedy recovery nearly all strategic wealth management.” Many of the UHNWIs interviewed indicated they felt their investments had recovered more quickly after the down- Turnover in investor relationships turn than perhaps the “general public” had. In some cases, It’s hard to say whether it is attributable to the post-down- they felt their advisors had helped them move away from turn hangover or simply a matter of it being an opportunity the more volatile real estate and public markets prior to the to shake things up, but a number of UHNWIs indicated depth of the downturn, and encouraged them to return they were assessing new advisor relationships, or looking to to some of those investments at the right time. “I’ve done restructure their existing investment advisor roster. well,” said one U.S.-based investor in charge of his family’s For one UHNWI who made his money in the U.S. office. “I feel we saw what was coming and moved away at retail industry, its nothing more than a matter of regular the right time.” due diligence. “I’m not looking to have different broker- age advisors compete against each other, but I want to Lowering risk, but fearing inflation be sure that the people I work with are the best at exe- UNHWIs, almost as a rule, are often more moderate risk tak- cuting my investment strategy.” As he has rebalanced his ers, focused more on wealth preservation and strategic growth assets to achieve his goals, he’s also replaced a couple of rather than high-return/high-risk investment. Following the his advisors because their areas of expertise no longer fit recession, some of those interviewed who had dabbled with the portfolio’s approach. higher-risk investments such as hedge funds were retreating Or as another UHNWI indicated, “There’s been some from those in favor of more mainstream equities. churn in relationships because sometimes, it’s just time for The biggest concern many of the UHNWIs is inflation. a change.”© Copyright Forbes 2011 5
  6. 6. Emerging Wealth from Emerging Markets Few economic developments have compared to the mete- Emerging market UHNWIs are generally younger oric growth of China both as a global industrial powerhouse, The average age of the UHNW individual in Russia is 49 and as a creator of unprecedented wealth for those entre- and is 50 in China. (Fig. 1) Compare that to more estab- preneurs, industrialists, and investors who have succeeded lished economies such as the U.S., where the average age over the past decade. While other economies contracted of a UHNWI is 66, or France, where it is 74. In other during the global credit crisis, China remained strong and words, emerging market UHNWIs are often just estab- vibrant, and today it leads the so-called BRIC nations— lishing themselves, so their overall influence and activity Brazil, Russia, India and China—as the greatest areas of will likely continue for an additional decade or two. Their growth for UHNWIs. wealthy status has just begun, and the long-term impact is Consider some recent numbers: In the 2011 Forbes bil- likely to be sizable. lionaire’s list, the BRIC nations produced more than half of the new billionaires to join the ranking. Until the past Emerging market UHNWIs are self-made 12 months, no nation other than the U.S. was home to Entrepreneurship is alive and well in the BRIC nations, more than 100 billionaires—today China has 115 and and is paying off handsomely for those that have succeeded. Russia 101. 100% of the UHNWIs studied in Russia are self-made— The analysis shows that UHNWIs in these emerging meaning every single one was responsible for creating their markets—while they have much in common with their own wealth and did not inherit it. counterparts elsewhere in the world—also have a number of unique characteristics. Figure 1: Average age of UHNWIs, by country 74 68 68 The ultra-rich in emerging markets are 66 66 65 64 making their fortunes at a younger age than 62 61 60 UHNWIs in the West. China’s and Russia’s wealthy are, on average, 15 years younger 50 49 than their counterparts in the U.S., U.K. or Germany. France Brazil Hong Germany U.S. U.K. Mexico Singapore Middle India China Russia Kong East© Copyright Forbes 2011 6
  7. 7. While Russia may be an extreme in that area—espe- cially given its political history over the past 90 years—other For UHNWIs in emerging wealthy individuals in the BRIC nations have been sim- ilarly entrepreneurial. In China, two thirds (66%) of the markets, determining how UHNWIs studied were self-made. For India, that figure is 65%, and for Brazil it is 67%. The impact of this entrepre- to give money away neurialism is further evident in the ongoing involvement of these individuals in their businesses (see below), and what is may be more difficult likely to be a continued expansion of their wealth based on their desire for ongoing success. than earning it. BRIC UHNWIs are involved in their business Whereas UHNWIs and entrepreneurs in some western money away has been more difficult than earning it. As this markets appear eager to sell their companies once they new generation of titans emerges, it is unclear whether they are successful, most of those in the BRIC nations remain will be as committed to giving back their wealth as some actively involved with their businesses. This may be of their western counterparts have been. For instance, just because they are younger and not yet ready to take a more 7% of Chinese UHNWIs analyzed in the study have their passive role. Or it may be attributable to the high growth own charitable foundations, a far cry from the 55% that do trajectories for many of these companies, and the desire of so in the U.S. the leaders to see that growth through. It may be premature to say that these individuals will Among the UHNWIs studied, 93% of Russian UHNW not be philanthropic, however, as many may see themselves individuals, and 85% of Chinese UHNWIs are employed as being at the stage of “building” their wealth. There are full time, meaning they are in control of, directing, or run- also social and political issues that are unique to these mar- ning their companies. The figures for India and Brazil are kets that are affecting giving strategies—for example, is 78% and 75%, respectively. philanthropy seen as a way to help a nation’s people, or is that a role for the government? Emerging market UHNWIs are still determining Ultimately, how a select number of UHNWIs in how to give back emerging markets approach philanthropy may end up guid- Philanthropy is a mixed bag among UHNWIs in emerg- ing others. These nations have yet to have their Carnegies ing markets. For many, determining how or when to give or Rockefellers to usher in their ages of philanthropy. Still a Man’s World Gender diversity has not yet come to the world of ultra-high net worth. In most of the markets studied, UHNW individuals are predominantly male. Of the markets studied, the ones with the highest percentage of female UHNW individuals were Hong Kong (23%) and Germany (17%). In most other markets, more than 90% of UHNW were male.© Copyright Forbes 2011 7
  8. 8. Managing Family Involvement There are extremely strong family links among the Figure 2: Family in Business UHNWIs studied. This is a global phenomenon, and it is Brazil present in nearly all markets, with a few notable exceptions 13 such as Russia. 25 Clearly, in certain societies, keeping family close is China a priority, and UHNWIs in these countries are more 12 likely to have children or other family members work- 27 ing in the business. (Fig. 2) More than half of UHNWIs France from the Middle East have their children involved in 50 their businesses, and a similar percent have other fam- 25 ily members involved (note that a person can have both Germany children and other family members employed). Similarly, 19 in India, 58% of UHNWIs have their children working 34 with them. Hong Kong Within many of these developing nations, one person’s 55 wealth is often seen as something to be shared—a legacy 30 that can enrich both the immediate and the extended fam- India ily. “In our culture, family still comes first. Wealth becomes 58 a way to bring everyone closer together,” said a wealthy 37 finance executive from Latin America. “It is important to Mexico share our advantages with those closest to us.” 11 But involving family in wealth strategies certainly 56 comes with its challenges. Once a family has significant Middle East wealth, the problem becomes how to preserve it for future 53 generations. This is often a surprisingly difficult task, 53 as it may require the family to tackle personal issues as Russia much as they need to deal with investment and financial 8 uncertainties. 17 Singapore 25 45 U.K. 11 UHNWIs in India, Hong Kong, the Middle East, and 14 France are most likely to have children involved in their business, while those in Mexico, the Middle East, and U.S. Singapore involve other family. 21 28 0% 50% 100% • Children in Business • Other Family in Business© Copyright Forbes 2011 8
  9. 9. To manage such conflicts, many UHNWIs turn to a single-family office (SFO), a professional organization ded- “In our culture, family still icated specifically to managing their personal fortunes. While SFO involvement was not directly analyzed in the comes first… It is important Forbes wealth list data, other studies have looked at the issues and characteristics of the SFO. According to a 2009 to share our advantages study from the Wharton Global Family Alliance, SFOs and the families behind them are generally entrepreneur- with those closest to us.” ial, insofar as the families involved are often still majority shareholders involved (similar in profile to the UHNWIs from the Forbes list). These families tend to view their SFOs as private investment services, more focused on main- taining and growing wealth than on “softer” services—a hedge fund expert shouldn’t be distracted by having to deal with domestic staff issues. Issues in the Family Office For a second-generation European business owner, managing multigenerational wealth through a single-family office is at times both a godsend and a curse. It both eases some of the issues related to investing and growth of the family fortune, but it also sets up a number of conflicts as different segments of the family have different opinions regarding allocation and risk profiles. “Our goal for the past several decades and going forward has been to manage our wealth independently so that the principals have enough time to devote to the business,” said the executive. “Staffing our office with professionals that don’t have a direct link to the family has been beneficial.” He added that the group has a staff of 9, including tax advisors and legal counsel. Still, he has found that as a third generation has become more involved in the SFO’s business and now sits on its committees, it is becoming increasingly necessary to outsource some of its functions. For example, the group recently decided to restaff its investing team to focus its expertise primarily on private equity placements (they used a unique performance bonus structure to lure a high-performer into the organization). Other portfolio matters are being contracted with several independent investment professionals. “We try to have a long-term investing vision and adhere to investing best practices,” he added. This helped the family ride out the 2009 downturn, and will help them find value in their future investments.© Copyright Forbes 2011 9
  10. 10. Globally, many expect the biggest growth in family Figure 3: Source of Wealth offices to occur in Asia, as UHNWIs in that region who have gained their wealth over the past two decades look Brazil 66 6 28 to come up with ways to pass it on to the next generation. “We’ve been pretty unsophisticated investors compared to China 1 Americans and Europeans,” said a Singapore-based inves- 65 20 14 tor specializing in biotech. “Wealthy Asians need to look France for ways to grow their assets and preserve them for future 33 17 50 generations.” Germany The importance of using Entrepreneurial activity still drives 36 32 32 services such as an SFO most wealth creation in both or private bank is further Hong Kong emerging and established markets 48 5 19 28 demonstrated by under- as most UHNWIs fall into the standing the source of the category of “self-made” wealth. India UHNWI’s wealth. 65 17 18 Entrepreneurial activity still drives the vast majority Mexico of wealth creation in most markets—the defining charac- 56 33 11 teristic of the “self-made” individual. In half the markets Middle East studied—Brazil, China, India, Russia, the U.K., and the 42 16 42 U.S.—more than 60% of the UHNWIs were “self-made,” meaning that they “earned” their wealth through the suc- Russia 100 cess and growth of their business ventures. But even in those markets where the majority of Singapore UHNWIs received their wealth through inheritance, 13 3 10 74 many are actively involved in growing that financial leg- U.K. acy. (Fig. 3) For example, in France, two thirds of the 80 10 10 UHNWIs inherited their wealth, but half are actively U.S. 1 involved today in growing the fortunes. Similarly, in the 68 18 13 Middle East, 42% of UHNWIs inherited their fortunes, but are still looking to grow them. • Self Made • Inherited • Inherited and Growing • Other© Copyright Forbes 2011 10
  11. 11. Creating a Philanthropic Legacy In 2010, many UHNWIs were issued a challenge: increase Figure 4: Charitable Foundation their charitable giving and develop a way to return their wealth to charitable causes. Brazil 38 The “Giving Pledge”—kicked off by Warren Buffet and 44 Bill and Melinda Gates—is an effort to have the wealthi- est individuals and families in America commit to giving China 7 the majority of their wealth to the philanthropic causes and 35 charitable organizations of their choice either during their lifetime or after their death. The goal: have those who have France 58 been most fortunate make a moral commitment to give, 33 and through their generosity make the world a better place. More than 50 of the wealthiest U.S. individuals and Germany 45 families have taken the pledge. And the challenge has been 64 extended overseas, as Buffet and Gates traveled to China to share their experiences with philanthropy with the wealthy Hong Kong 43 entrepreneurs from that emerging nation. 30 Philanthropy and charity have long been part and par- cel with ultra high net worth, as individuals look for ways India 48 to create a more lasting legacy and have a greater impact 24 on society. The analysis of the Forbes data suggests that this is still Mexico 44 true. In three quarters of the markets studied, more than 56 40% of the UHNWIs fund their own charitable founda- tion, or run a charitable foundation founded or started by Middle East 63 other family members. (Fig. 4) And in seven of the markets, 58 more than 40% of the UHNWIs gave other substantial charitable contributions; that is, made donations outside of Russia 26 their foundations, or made sizable donations without hav- 52 ing their own or a family foundation. While many think of philanthropy as an American Singapore 43 notion—people in the U.S. give more to charity than 13 U.K. 57 In most markets studied, foundations and charitable 49 giving is part of the legacy UHNWIs are trying to create, but the ultra-rich in emerging markets have U.S. some catching up to do. 55 50 0% 50% 100% • Charitable Foundation • Other substantial charitable giving© Copyright Forbes 2011 11
  12. 12. people in any other country—clearly giving has become a foundation, and 35% make some sort of other sub- global in nature. In the U.S., 55% of UHNW individu- stantial charitable giving. There remains great cultural als studied operate charitable foundations, and of those that hesitancy in that country to making a charitable pledge. do not, nearly three quarters recorded substantial charitable For instance, Confucian values call for people to take care donations. Yet even more UHNWIs operate foundations in of their families first, which is often considered a reason the U.K. (57%) and France (58%). And in the Middle East, why Chinese UHNWIs leave wealth for their descen- where Sharia law often directs charitable contributions, dents. In fact, when Buffet and Gates visited, they had 63% of UHNWIs fund a charitable foundation. to issue an official letter to the state news agency to clar- Even in the emerging market of India, 48% of UHNWIs ify that attendees at their event would not be asked to have a charitable foundation. Consider, for example, Wipro donate anything. founder Azim Premji, who has pledged much of the fortune But that could be changing. After the visit by Buffet and he made through his information technology company to Gates, several Chinese entrepreneurs changed direction. his foundation, which currently is focused on improving Chen Guangbio, a recycling entrepreneur with a fortune public education in India. estimated at more than $400 million, announced on his As noted earlier, China remains an outlier in the area company’s website that he planned to give all his money of philanthropy, as just 7% of Chinese UHNWIs have away. Others could follow his lead. Philanthropy Keeps a Legacy Alive One could argue that the most valuable and enduring assets of a multigenerational family are its shared values, its reputation, and its place in society. Evidence of its good work can serve as a magnet to draw individual family members together and provide direction for the future. Nowhere is this truer than in the family charitable foundation of the descendents of an American industrialist who made his fortune more than 60 years ago. Based in a midsize city, the foundation—actually an amalgam of several foundations run by different branches of the family—has two key points of focus: maintain and grow its endowment, and support the kinds of causes the family’s patriarch would have supported during his lifetime, according to a family board member. Maintaining and growing the endowment, the board member said, comes via the family’s commitment to supporting their foundations. The commercial side of the family fortune has shifted from manufacturing to investing, including commercial real estate and private equity investment. While those investments are not part of the foundation’s endowment, their ongoing success provides the funds, the board member added. In terms of causes, the foundation’s charter calls for it to support areas of social equality, cultural enrichment, and local causes, including medical research and education. “It is important for us to maintain what our family stands for,” the board member said. “Our wealth came via inheritance, but our true legacy is really about what we continue to do with it.”© Copyright Forbes 2011 12
  13. 13. Finding Success in Public Service Philanthropy is one way UHNWIs can give back to society. Another way is through activity in the pub- Many UHNWIs see political lic sector. A growing number of entrepreneurial UHNWIs, involvement as a way to having made their fortunes in business, have turned to politics to take their success in the private sector shape public debate and use and bring it to public service. Consider the number of high-profile billionaires that have turned from business their business experience to politics. New York City mayor Michael Bloomberg made his fortune via his namesake information services for public service. and media company. Lebanese prime minister designate Najib Mikati co-founded the telecommunications com- pany Investcom. In most cases, these are not individuals who are look- ing to further enrich themselves via the public sector, or see political involvement as a way to improve the standing of their businesses. Rather, many see it as a way to shape the debate on critical issues, and use their business experi- ence for public service. Still, tracking the political activity of the world’s richest people is difficult. The Forbes Insights research defines “political involvement” as those individuals who have donated money to a political party in a manner that is recorded in public record; have been known to attend political fundraisers; have served on or in a government cabinet, task force, or partnership on the local, federal or international level; have attended global economic confer- ences sponsored by governing bodies; or have run for or served in elected office.© Copyright Forbes 2011 13
  14. 14. While this definition can identify some of the politi- Figure 5: Political Involvement cal involvement of UHNWIs, information to back up all Brazil involvement is not always available. (Fig. 5) As a result, the 13 87 figures for those who are “not” politically involved While political involvement of China include both UHNWIs UHNWIs is not easy to track, 6 94 who noted that they remain wealthy individuals in the U.S., France politically neutral as well India, and the Middle East are 17 83 among the most active. as those for whom no data Germany 2 is available. Thus, it is pos- 98 sible that some are politically active on some level, but data Hong Kong cannot be found either due to country disclosure laws or 35 65 dearth of public information. In nations studied, political activity among UHNWIs India is most common in the Middle East (74%), the U.S. (52%), 48 52 and India (48%). Mexico In the Middle East, the high rate of political involve- 33 67 ment may be due to the concentration of wealth of the Middle East ruling families, and the political appointment of mem- 74 26 bers of these families in the countries studied (the United Russia Arab Emirates, Saudi Arabia, Kuwait, and Lebanon). 20 80 For example, prime minister of Kuwait, Sheikh Nasser Al-Sabah, is the nephew of the emir Sheikh Sabah Singapore Al-Ahmad Al-Jeber Al-Sabah. It is this kind of concen- 15 85 tration of wealth and political power that led to some of U.K. the protests and democracy demonstrations in countries 9 91 such as Bahrain in 2011. U.S. In the U.S. and India, political involvement and polit- 52 48 ical donations may come from the increasing expense of running a political campaign. In the U.S., political fun- • Yes • No/Unknown draising has been well documented, and the courting of wealthy individuals is part of the ongoing process. In India, electioneering has also become dominated by candidates’ desires to outspend their rivals as they run for office. This trend also accounts for the lower levels of political involvement in certain European countries, where elec- tions may be publically financed, and privacy laws limit political disclosures.© Copyright Forbes 2011 14
  15. 15. Global Citizens Who Stay Put UHNWIs are the stereotypical global citizens. Given their Figure 6: Citizenship of UHNWIs wealth and the global nature of their investments and inter- Brazil ests, many are likely to maintain multiple residences and 89 11 conduct business and across the world. For example, one UHNWI interviewed for this study China is a U.S. citizen. His office 94 6 is based in the U.K., and he The vast majority of UHNWIs France maintains residences in both have residence in their country of 91 9 London and New York, citizenship, but Hong Kong and the Germany where his family resides. His U.K. still attract the ultra-rich from 81 19 elsewhere in the world. primary area of investment Hong Kong specialty, however, is real 72 28 estate in developing markets, particularly in India and now Hong Kong, and he operates out of offices in those nations India as well. 94 6 Still, the vast majority UHNWIs individuals maintain cit- Mexico izenship residence in the same country. (Fig. 6) In two thirds 100 of the markets studied, more than 90% of UHNWIs hold citi- Middle East zenship and residence in the same country. For Mexico and 100 the Middle East, all of the UHNWIs studied live and reside in Russia those regions. In the U.S., the figure is 97%. 93 7 The biggest outlier is Hong Kong—still maintaining its image as a haven for global wealth—where 28% of the Singapore UHNW individuals studied hold citizenship and residence 93 7 in different countries. In the U.K., where UHNWIs from U.K. elsewhere in the Commonwealth often maintain residence, 83 17 17% of the individuals studied hold citizenship and resi- U.S. dence in different countries. 97 3 • Holding Citizenship and Residence in Same Country • Holding Citizenship and Residence in Different Countries© Copyright Forbes 2011 15
  16. 16. conclusion Emerging Wealth, Emerging Markets, Emerging Opportunities There has been a significant shift in how wealth is distrib- the most successful entrepreneurs. And emerging market uted around the globe, as so-called emerging markets have money will also be fueling the growth of wealth in western come forward as the fastest growing markets for the ultra- markets—consider how Russian entrepreneur and venture rich, perhaps at the expense of more established wealth in capitalist Yuri Milner has invested in successful U.S. Internet western Europe. Driven by strong entrepreneurism and properties such as Facebook, Zynga, and Groupon, whose meteoric growth in countries such as China, India, and owners themselves are billionaires. Russia, these newly minted UHNWIs are creating a new Still, challenges exist. The concentration of wealth in demographic wealth profile. countries such as India and China—where significant pov- Consider, for example, the profile of the average erty also exists—may need to be watched closely. In India, UHNWI in China. This person is young ( just hitting 50), for instance, concerns have been voiced that major family- self-made, entrepreneurial, and continues to be focused on based corporations wield disproportionate influence over building wealth. At the same time, the Chinese UHNWI markets. Local governments in China are looking for ways may not yet be comfortable with wealth, and is still figur- to expand the standard of living for its emerging middle ing out how to affect society through philanthropy. class. The concern: to avoid chances of social unrest. The impact of this geographic shift in wealth could be Ultimately, the influence of this shift will be felt for long-lasting. Not only do these markets make billionaires, years to come. Older, established wealth could be usurped but they are also are attracting the investments of other by the emerging market billionaires. Philanthropic giv- UHNWIs seeking stable growth opportunities. This strong ing by these emerging market UHNWIs could change the funding could further spur economic growth in the emerg- specter of poverty into opportunity in these markets and ing markets, creating even more innovation and wealth for create a lasting legacy. Methodology The information in this study is based on an exclusive analysis of ultra-high-net-worth individuals in 12 markets conducted by Forbes Insights. The markets studied were: Brazil, China, France, Germany, Hong Kong, India, Mexico, the Middle East (United Arab Emirates, Saudi Arabia, Kuwait, Lebanon), Russia, Singapore, the U.K., and the U.S. Using the Forbes Magazine list of the world’s wealthiest individuals from 2010, Forbes Insights evaluated trends and developments of UHNW individuals against a number of key criteria, including company ownership, citizenship and residence, source of wealth, employment status, family business involvement, charitable foundations and giving, and political involvement. The minimum net worth of the individuals studied was US$1 billion or local currency equivalent in all markets. There were three exceptions: India ($500 million minimum), China ($425 million minimum), and Singapore ($190 million minimum). In addition, 17 interviews were conducted with UHNWIs in the countries studied. Each person interviewed had at least US$60 million in net investable assets. Many of the interviews were conducted “off the record,” but the insights they provided were used to help shape the analysis of the data. Others were conducted “not for attribution,” in order to protect the privacy of the individual interviewed. Christiaan Rizy Stuart Feil Brenna Sniderman Clara Knutson Director Editorial Director research Director Researcher© Copyright Forbes 2011 16
  17. 17. Appendix A Ultra High Net Worth Individuals by Country Brazil (n=18) Company Ownership Employment Status Private holding 22% Full-time 75% Public holding 78% Retired 6% Full-time investor 6% Citizenship Residence Other 13% Citizenship and residence in same country 89% Charitable Foundation Citizenship and residence Yes 38% in different countries 11% No/None found 63% Other substantial charitable Gender giving (total) 44% Male 94% Female 6% Family in Business Children in business 11% Average Age Other family in business 14% Age 68 Source of Wealth Political Involvement Self made 66% Yes 13% Inherited 6% No/Unknown 87% Inherited and growing 28% Other 0% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $27,000© Copyright Forbes 2011 17
  18. 18. China (n=400) Company Ownership Employment Status Private holding 32% Full-time 85% Public holding 64% Retired 2% Full-time investor 2% Citizenship Residence Other 2% Citizenship and residence in same country 94% Charitable Foundation Citizenship and residence Yes 7% in different countries 6% No/None found 94% Other substantial charitable Gender giving (total) 35% Male 96% Female 5% Family in Business Children in business 12% Average Age Other family in business 27% Age 50 Source of Wealth Political Involvement Self made 65% Yes 6% Inherited 1% No/Unknown 94% Inherited and growing 20% Other 14% Net Worth Range Min net worth ($mil) $425 Max net worth ($mil) $8,000© Copyright Forbes 2011 18
  19. 19. France (n=12) Company Ownership Employment Status Private holding 17% Full-time 58% Public holding 83% Retired 25% Full-time investor 0% Citizenship Residence Other 17% Citizenship and residence in same country 91% Charitable Foundation Citizenship and residence Yes 58% in different countries 9% No/None found 42% Other substantial charitable Gender giving (total) 33% Male 92% Female 8% Family in Business Children in business 50% Average Age Other family in business 25% Age 74 Source of Wealth Political Involvement Self made 33% Yes 17% Inherited 17% No/Unknown 83% Inherited and growing 50% Other 0% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $27,500© Copyright Forbes 2011 19
  20. 20. Germany (n=53) Company Ownership Employment Status Private holding 74% Full-time 49% Public holding 26% Retired 19% Full-time investor 4% Citizenship Residence Other 9% Citizenship and residence in same country 81% Charitable Foundation Citizenship and residence Yes 45% in different countries 19% No/None found 36% Other substantial charitable Gender giving (total) 64% Male 83% Female 17% Family in Business Children in business 19% Average Age Other family in business 34% Age 66 Source of Wealth Political Involvement Self made 36% Yes 2% Inherited 32% No/Unknown 98% Inherited and growing 32% Other 0% Net Worth Range Min net worth ($mil) $1,200 Max net worth ($mil) $23,500© Copyright Forbes 2011 20
  21. 21. Hong Kong (n=40) Company Ownership Employment Status Private holding 33% Full-time 83% Public holding 68% Retired 13% Full-time investor 0% Citizenship Residence Other 5% Citizenship and residence in same country 72% Charitable Foundation Citizenship and residence Yes 43% in different countries 28% No/None found 58% Other substantial charitable Gender giving (total) 30% Male 78% Female 23% Family in Business Children in business 55% Average Age Other family in business 30% Age 68 Source of Wealth Political Involvement Self made 48% Yes 35% Inherited 5% No/Unknown 65% Inherited and growing 19% Other 28% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $24,000© Copyright Forbes 2011 21
  22. 22. India (n=100) Company Ownership Employment Status Private holding 15% Full-time 78% Public holding 85% Retired 10% Full-time investor 1% Citizenship Residence Other 11% Citizenship and residence in same country 94% Charitable Foundation Citizenship and residence Yes 48% in different countries 6% No/None found 52% Other substantial charitable Gender* giving (total) 24% Male 75% Female 5% Family in Business Children in business 58% Average Age Other family in business 37% Age 60 Source of Wealth Political Involvement Self made 65% Yes 48% Inherited 17% No/Unknown 52% Inherited and growing 18% Other 0% Net Worth Range Min net worth ($mil) $500 Max net worth ($mil) $27,000 *Gender could not be identified for remaining 25%© Copyright Forbes 2011 22
  23. 23. Mexico (n=19) Company Ownership Employment Status Private holding 42% Full-time 78% Public holding 58% Retired 0% Full-time investor 11% Citizenship Residence Other 11% Citizenship and residence in same country 100% Charitable Foundation Citizenship and residence Yes 44% in different countries 0% No/None found 44% Other substantial charitable Gender giving (total) 56% Male 100% Female 0% Family in Business Children in business 11% Average Age Other family in business 56% Age 64 Source of Wealth Political Involvement Self made 55% Yes 33% Inherited 33% No/Unknown 67% Inherited and growing 11% Other 0% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $53,500© Copyright Forbes 2011 23
  24. 24. Middle east (n=19) Company Ownership Employment Status Private holding 42% Full-time 68% Public holding 58% Retired 11% Full-time investor 11% Citizenship Residence Other 0% Citizenship and residence in same country 100% Charitable Foundation Citizenship and residence Yes 63% in different countries 0% No/None found 37% Other substantial charitable Gender giving (total) 58% Male 100% Female 0% Family in Business Children in business 53% Average Age Other family in business 53% Age 61 Source of Wealth Political Involvement Self made 42% Yes 74% Inherited 16% No/Unknown 26% Inherited and growing 42% Other 0% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $19,400© Copyright Forbes 2011 24
  25. 25. Russia (n=62) Company Ownership Employment Status Private holding 53% Full-time 93% Public holding 47% Retired 1% Full-time investor 1% Citizenship Residence Other 5% Citizenship and residence in same country 93% Charitable Foundation Citizenship and residence Yes 26% in different countries 7% No/None found 74% Other substantial charitable Gender giving (total) 52% Male 98% Female 2% Family in Business Children in business 8% Average Age Other family in business 17% Age 49 Source of Wealth Political Involvement Self made 100% Yes 20% Inherited 0% No/Unknown 80% Inherited and growing 0% Other 0% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $15,800© Copyright Forbes 2011 25
  26. 26. Singapore (n=40) Company Ownership Employment Status Private holding 30% Full-time 63% Public holding 70% Retired 15% Full-time investor 8% Citizenship Residence Other 15% Citizenship and residence in same country 93% Charitable Foundation Citizenship and residence Yes 43% in different countries 7% No/None found 58% Other substantial charitable Gender* giving (total) 13% Male 30% Female 3% Family in Business Children in business 25% Average Age Other family in business 45% Age 62 Source of Wealth Political Involvement Self made 13% Yes 15% Inherited 3% No/Unknown 85% Inherited and growing 10% Other 74% Net Worth Range Min net worth ($mil) $190 Max net worth ($mil) $7,800 *Gender could not be identified for remaining 67%© Copyright Forbes 2011 26
  27. 27. United Kingdom (n=29) Company Ownership Employment Status Private holding 83% Full-time 71% Public holding 17% Retired 17% Full-time investor 6% Citizenship Residence Other 6% Citizenship and residence in same country 83% Charitable Foundation Citizenship and residence Yes 57% in different countries 17% No/None found 43% Other substantial charitable Gender giving (total) 49% Male 90% Female 7% Family in Business Children in business 11% Average Age Other family in business 14% Age 65 Source of Wealth Political Involvement Self made 80% Yes 9% Inherited 10% No/Unknown 91% Inherited and growing 10% Other 0% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $12,000© Copyright Forbes 2011 27
  28. 28. United States (n=400) Company Ownership Employment Status Private holding 74% Full-time 76% Public holding 26% Retired 11% Full-time investor 9% Citizenship Residence Other 4% Citizenship and residence in same country 97% Charitable Foundation Citizenship and residence Yes 55% in different countries 3% No/None found 45% Other substantial charitable Gender giving (total) 50% Male 90% Female 11% Family in Business Children in business 21% Average Age Other family in business 28% Age 66 Source of Wealth Political Involvement Self made 68% Yes 52% Inherited 18% No/Unknown 48% Inherited and growing 13% Other 1% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $54,000© Copyright Forbes 2011 28

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