The number of wealthy Americans failed to grow on a year-over-year basis in
2005 for the first time in three years, while China and India continued to mint
new fortunes at a healthy pace, and South Korea led all comers.
The number of wealthy Americans climbed 6.8% in 2005, down from a 9.9% pace
in 2004. The number of wealthy individuals, those with at least $1 million in
investable assets, grew 21.3% in South Korea, 19.3% in India, 17.4% in Russia
and 6.8% in China.
The number of high-net-worth individuals around the world grew by 6.5% in
2005, totaling 8.7 million. Overall, the individuals' wealth during the period
grew by 8.5%, to $33.3 trillion in financial holdings, the report said.
"These financial gains were particularly strong in Latin America, Eastern
Europe, Asia-Pacific, Africa and the Middle East, where emerging markets
continue to play a moderate game of 'catch up' with major markets," the report
Interestingly, the number of ultra-high-net-worth individuals, those with
individual financial assets of more than $30 million, grew more quickly than
their more modestly well-off cousins, posting a 10.2% increase in 2005, compared
with an 8.9% increase in 2004.
"These gains show that while market returns and economic indicators signaled
that a deceleration was under way in many regions of the world, high net worth
individuals were still able to find select pockets of high performance in 2005,"
the authors wrote.
The report said the Asia-Pacific region and parts of Latin America and the
Middle East had strong economic growth, aiding wealth creation, while more
developed economies, including the U.S., showed signs of cooling.
"This easing of global real GDP growth reflects the slowing performance of
the world's most mature economies. Emerging markets, on the other hand,
continued to outperform other parts of the world, aiding wealth creation in
those economies," the report said.
China and India posted GDP growth rates of 9.9% and 8.0%, respectively, in
2005, among the highest of any market. Parts of Eastern Europe and Latin America
also posted real GDP growth rates that exceeded the 4.3% global average.
And stock-market performance also played a role in wealth creation in 2005.
While the Dow Jones World Stock Index rose 9.4% in 2005, that was down from
14.4% growth in 2004. It was underperformance in the U.S. market that was the
primary culprit for that dip.
Add in the fact that, for all their financial sophistication, U.S. investors
remain rather provincial, with about 76% of their wealth tied up in U.S. stocks.
That has hurt U.S. wealth creation to some extent as market capitalizations
and benchmark index performance have grown rapidly in Eastern European,
Asia-Pacific and Latin American markets, driven by ongoing foreign investment
and strong corporate profits. According to the report, the Dow Jones World Stock
Index -- excluding U.S. equities -- has risen 88% since the end of 2002.
"Behavior patterns in North America ran counter to these worldwide trends,"
the report concluded. In 2005, the report noted, markets such as India, South
Korea, Poland and South Africa all returned better than 40%, while the S&P
500 generated 3.0% returns.
"If the performance of American domestic markets continues to be dwarfed by
international exchanges, we expect North American high net worth individuals to
increase their international allocations at a faster rate than they have in the
High net worth and ultra high net worth clients have validated this
expectation, attesting that new funds are likely to be invested outside of North
America," the report concluded.