The 2013 edition of The Wealth Report highlights that wealth creation still continues, despite some of the world’s largest economics struggling to pull themselves out of recession. It also shows that wealthy investors are rediscovering their appetite for risk as they grow increasingly disenchanted with the miserly returns from safe-haven investments such as cash and government bonds.
Caution, however, remains and prime property continues to attract the attention of HNWIs. But it is not just traditional safe haven locations such as London that are seeing residential price rises. Increasingly, we are seeing the likes of Dubai and Dublin, which were hit hard by the ravages of the global financial crisis, bounce back.
Conducting the report
We have pulled together even more research than ever. Our Prime International Residential Index (PIRI) now covers 80 of the world’s leading luxury residential markets and our wealth creation data predicts the growth in HNWI numbers over the next 10 years for over 80 countries and cities.
Our annual Attitudes Survey of private bankers and wealth advisors now represents the views of 15,000 HNWIs worth in total almost US$1tr. We have even added some entirely new research in the form of the inaugural results of our Luxury Investment Index.
“ Most HNWIs now want to take more control of their investment portfolios ”
Un-surprisingly we confirmed…
That most HNWIs now want to take more control of their investment portfolios. It appears that many are frustrated that professional wealth managers could not do more to protect them from the effects of the global financial crisis.
This would also seem to explain the growing interest in “investments of passion”. Rightly or wrongly HNWIs seem keener to invest in things that they enjoy collecting and which they feel they have a greater understanding of than complicated financial instruments.
There was also a slowdown in overall spending levels. Russia, North America and Europe all saw a drop in luxury retail therapy. Though the whole world hasn’t stopped spending. Across Asia, a net balance of 19% of HNWIs spent more last year on luxury goods than in 2011, helping to make Chinese liquor brand Moutai the world’s fourth most valuable luxury brand with a value of $12bn, according to China’s Hurun Report.
More unexpected, perhaps, was that philanthropy did not follow suit. The Attitudes Survey revealed that the philanthropic activity of HNWIs around the world increased last year, despite the continuing global economic uncertainty.
Increasingly, philanthropy is also being used as an important tool to help the children of wealthy individuals develop their financial skills in readiness for taking over the family fortune or business. Newer forms of hands-on philanthropy, such as impact investing and venture philanthropy, are attracting younger, entrepreneurial HNWIs who relish combining their charitable activities with their business skills.
The growth of the capital value of classic cars over the past decade, as revealed by our new Luxury Investment Index, was also quite startling.
“ The growth of wealth in parts of Latin America and Africa is set to far outpace the West’s in the coming decade ”
Since the last study…
China has appointed a new set of leaders who will govern for the next 10 years. How they handle the growing gap between the nation’s rich and poor and increasing public protests over corruption could be one of the most important factors in determining the wealth creation prospects of many of the world’s HNWIs over the coming decade.
Looking to the future…
The findings from our study into global wealth creation over the next decade, suggest wealth advisors will need to better understand the needs of HNWIs in all the emerging wealth centres of the world. While much of the focus rests on Asia, in particular China, the growth of wealth in parts of Latin America and Africa is set to far outpace the West’s.
If readers remember only one thing it should be
Although the cities of the East are becoming more influential, London will still be the most important city to HNWIs in 10 years’ time, according to the results of the report’s Attitudes Survey.
Luxury Society is pleased to share Knight Frank’s full Wealth Report with our readers. Please visit knightfrank.com/wealthreport to download.