2012 World Wealth Report: Passion Investments Gain in Popularity
When the 2012 “World Wealth Report” from Capgemini and RBC Wealth Management was released on Tuesday, the growth of Asian millionaires led the news because it was the first time that Asia-Pacific had more millionaires than North America. But behind the headlines were a few more interesting bits of data for private wealth managers.
According to the report, so-called “investments of passion,” including art, jewelry, and memorabilia, attracted interest as substitute investments in 2011, especially among the emerging-market crowd. So if you don’t know the difference between, say, a Monet and Manet, or hadn’t heard that Joan Miro’s 1927 work Peinture (Etoile Bleue) sold for a record US$36.9 million at a London auction this week, it may be time to brush up on some of the finer things in life — including art history — so you can keep up with your clients’ interests.
The report noted that while these investments do not count toward its calculations of HNWI investable wealth, many wealthy people choose to spend a lot of money on them. “While these investments are not strictly an alternative to financial assets, the global economic and financial crisis has certainly led many HNWIs to view these holdings as an important component of their overall investment strategy,” the authors said. (For more on this topic, see the recent report “Profit or Pleasure? Exploring the Motivations Behind Treasure Trends” from Barclays Wealth and Investment Management and “Keeping a Cool Head About a Passion Investment” in the New York Times. Also, US Trust has a video clip on art as a source of liquidity.)
Wealthy young investors from emerging markets were “an especially powerful force” behind many of the classes of passion investments, according to the “World Wealth Report.” The authors also noted that in early 2012, the European Fine Art Foundation reported that China (including Hong Kong) had overtaken the U.S. as the world’s largest market for art and antiques.
In case you missed the report, here are some of the key take-aways:
- Asia-Pacific is now home to slightly more HNWIs than any other region, topping the list for the first time. In 2011, the region boasted 3.37 million HNWIs compared with 3.35 million in North America and 3.17 million in Europe.
- Even though Asia-Pacific had the most HNWIs, North America still had the lion’s share of investable wealth in 2011 with US$11.4 trillion, down 2.3% from 2010. Asia-Pacific was not too far behind with $10.7 trillion, down 1.1%. Wealth was also down in Europe, where investable wealth totaled $10.1 trillion, also a slip of 1.1%. In Latin America, HNWI wealth fell 2.9%, but the HNWI population increased by 5.4%.
- Wealthy individuals in Hong Kong and India were the hardest hit by economic woes in 2011: both lost HNWIs in 2011. In Hong Kong, where HNWIs traditionally have high equity exposure, the drop in the stock market helped reduce the HNWI population by 17.4%. Similarly, India’s HNWI population shrunk by 18%, edging it out of the Top 12 countries with the largest HNWI populations (India was replaced by South Korea).
- The United States, Japan, and Germany together accounted for 53% of the world’s HNWIs in 2011, up slightly from 2010.