ZURICH -- Assets held by the world's richest people rose by 11.4 percent last year, a study showed, but a slowing world economy might put a brake on the lavish expansion rate in coming years.
Soaring commodity prices and equity markets and rapidly expanding emerging economies caused the global pool of wealth — assets of more than $1 million held by one individual — to expand to $37.2 trillion at the end of 2006.
"Many economies are likely to decelerate ... The dual risks of rising energy prices and geopolitical conflicts are a continued threat, adding a level of uncertainty to our current forecasts," the Merrill Lynch/Cap Gemini study said.
Global wealth was expected to expand by 6.8 percent each year up until 2011, boosting the world's total wealth to $51.6 trillion, said the study, known as the World Wealth Report, and widely used as a benchmark in the industry.
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Low market volatility in 2006 had taken away some of the lustre of alternative investments such as hedge funds and private equity, the study also showed, with exposure halving to 10 percent from 20 percent in an average portfolio.
Booming real estate markets attracted more money however, helped by good returns in Real Estate Investment Trusts (REIT), and the average allocation in wealth portfolios rose to 24 percent from 16 percent in 2005.
At 23 percent, wealth grew fastest in Latin America, followed by Africa by 14 percent, the Middle East by 12 percent and Asia-Pacific by 11 percent.
The overall growth rate of wealth was well above global economic growth of 5.4 percent in 2006, the study said.
North America also had a healthy growth rate of 10 percent, and remained the region with the largest population of wealthy investors in the world, with 3.2 million people ranking as millionaires or billionaires.
CLOUDY HORIZON
Flush with cash, wealthy people also handed out money to the less fortunate, spending a total of $285 billion on philanthropic causes, with North American and Asian millionaires and billionaires the most generous.
But wealth management was unlikely to keep booming, as the U.S. economy was seen slowing amid worries about the sub-prime mortgage sector, and the outlook for countries such as India and China had turned slightly less bullish.
Growth would be highest in the Middle East, at 9.5 percent until 2011, because of persistently high oil prices, the study said, after a correction in stock markets in the region slowed wealth accumulation in 2006.
Rapid growth has prompted banks across the world to expand their wealth management activities in recent years, but the sector should brace for a slow-down, given the chance of a decline in stock markets, recent studies have shown.
The wealth management sector is highly fragmented, with even the largest players such as UBS and Citigroup holding less than a 5 percent market share and hundreds of often tiny private banks and family offices abounding.
Market growth assumptions are often unrealistic, a recent study by PWC said, with wealth managers expecting global assets to rise by 23 percent in the next three years, and those handled by their own banks to grow even faster, by 30 percent.
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