The Hindu Business Line : `Preservation of wealth is the mantra of rich'

Around the world, moneyed individuals continue to direct their funds to what the report describes as "fixed income, alternative investments, real estate and other investments less correlated to equities." Simply put, wealth preservation is the mantra.

KOLKATA, June 23

HIGH net worth individuals' wealth in Asia-Pacific nations jumps by 10.7 per cent. A wine index outperforms equities by 97 per cent between 2000 and 2002. The likelihood for the rich to take investment decisions without consulting professionals declines to 45 per cent, down from 55 per cent in 2000.

Welcome to such nuggets of information on the affluent, captured by Merrill Lynch and Cap Gemini Ernst & Young in their World Wealth Report 2003. Released earlier this month and made available to investors, the report belts out many interesting details on individuals' attitude towards money.

For the record, their numbers have increased by just under two lakh around the world last year, up 2.1 per cent to 7.3 million people. This, it is pointed out, is the lowest growth rate in the seven-year history of the World Wealth Report.

The advancement recorded by the A-Pac region, which happened despite Japan's economic woes, was supported by two key factors: high savings rates and increase in GDP. This was particularly evident in economies like China, South Korea and Australia. The slowdown in wealth accumulation elsewhere may be attributed to sluggish GDP growth and declining stock prices.

In South Korea the Seoul stock exchange recorded a rise in market capitalisation for the fourth consecutive year, the real GDP continuing its recovery from the Asian financial crisis of 1997. Other major centres like Singapore and Hong Kong witnessed decline in their market cap by 13.7 per cent and 8.5 per cent respectively.

Their conservative strategies are a result of recent "corporate scandals, perceived conflicts of interest related to equity research, accounting irregularities and poor investment performance" - all of which combined to erode confidence.

The result? Many more high net worth individuals are turning to financial advisors for personalised guidance instead of opting for self-directed investment. Their personal wealth, however, is expected to grow at an average rate of seven per cent annually over the next five years, reaching around $38 trillion by end-2007.

And here are a few more trends and factoids:

Alternative avenues - hedge funds and real estate investment trusts - have emerged as big beneficiaries worldwide.

There is a dramatic change in expectations even as attitudes are becoming more complex and difficult to satisfy.

There is less new wealth, but investors are getting more involved.

Assets managed by hedge funds increased 8 per cent bringing it to around $650 billion globally. This is projected to stand at $1.5 trillion in 2010.

There is an increased desire for philanthropy; the need to give back to society is a key driver. Many, however, lack the means for effective execution.

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