Driving Global Wealth

Transcription

1 Driving Global Wealth Mapping ultra high net worth individuals around the globe in association with:

2 Table of Contents Key findings 3 Introduction: Emerging Wealth Takes Over 4 The Lingering Impact of the Global Downturn 5 Emerging Wealth from Emerging Markets 6 Managing Family Involvement 8 Creating a Philanthropic Legacy 11 Finding Success in Public Service 13 Global Citizens Who Stay Put 15 Conclusion: Emerging Wealth, Emerging Markets, Emerging Opportunities 16 Methodology 16 Appendix A: Ultra High Net Worth Individuals by Country 17 Appendix B: Research Definitions 29 Copyright Forbes

3 he last few years have been historic for wealthy individuals not so much in their importance but in how they ve changed some of the attitudes and characteristics of this unique investment sector. The global credit crisis had an impact on all levels of society, including the very wealthy, that saw gains they had made disappear in the sudden market volatility. And while signs of recovery appeared during the past year, the wealthy, as everyone else, have been taking a more guarded approach to risk. At the same time, entering the second decade of the 21st century, the balance of global wealth has begun to shift from traditional western economies to the newer emerging markets. The unprecedented growth of the Chinese economy, the expansion of India as a repository for innovation, and the ongoing progress of markets in Russia, Brazil and other developing nations, has led to this swing in the nature of the world s richest individuals and families. In fact, our study suggests that the center of growth for UHNWIs has shifted eastward. While the U.S. still has the greatest number of UHNWIs, China, Russia and India have overtaken Western Europe in the number of billionaires they produce. This marks a fundamental shift in the demographics of the world s ultra-rich, and this could have an impact on spending and investing in the future. Simply put, it is not just the number of wealthy individuals in these emerging markets, but how money is flowing into these areas from around the globe. As they look for new investing opportunities, UHNWIs saw that these emerging markets were less affected by the downturn than were funds and investments in the U.S. and Europe. Today, they are adding these opportunities to their wealth management portfolios. To gain a greater understanding of the characteristics of ultra high net worth individuals (UHNWIs), and how this investment segment is developing, Forbes Insights, in association with Societe Generale Private Banking, conducted an in-depth analysis of the world s wealthiest individuals. This exclusive data is derived from Forbes Magazine s database of the world s wealthiest people, looking at both people who made the billionaire s list in 2010, as well as other UHNWIs. This study looks at the characteristics of UHNWIs in a dozen global markets: Brazil, China, France, Germany, Hong Kong, India, Mexico, the Middle East, Russia, Singapore, the U.K., and the U.S. Analysis was conducted on ten different criteria, including: Source of wealth: Is the wealthy individual self-made, or did he or she inherit wealth? Company ownership: Is the individual s company private or publicly held? Family: Does the individual have children or other relatives involved in his or her business? Employment: Is the individual still involved in the venture, retired, or a full-time investor? Net worth: What is the range of the net worth of the individuals being analyzed? : Does the individual hold citizenship and residence in the same country or in different countries? Political involvement: How involved is the individual in national or local politics? Charitable foundation: Does the individual fund or run his or her own charitable foundation, or does the individual otherwise make philanthropy and giving a large part of his or her life? Age: How old is the individual? Gender: Is the individual male or female? Copyright Forbes

4 Key Findings Forbes Insights, in association with Societe Generale Private Banking, examined the unique characteristics of ultra high net worth individuals (UHNWIs) in a dozen countries. The analysis is based on exclusive data from Forbes Magazine s database of the world s wealthiest people. The minimum net worth of the individuals studied was US$1 billion, with three exceptions: India ($500 million minimum), China ($425 million minimum), and Singapore ($190 million minimum). Key findings from this analysis include: While recovery seems to have come quickly to many UHNWIs, there are still lingering effects from the global downturn. In particular, the impact has been on some of their investing attitudes and actions. Based on interviews and conversations with UHNWIs, they appear to have reduced their risk exposure, but have significant concerns about the possible impact of inflation over the coming years. In addition, many are revising their portfolios with greater investment in emerging markets such as China and the Asia Pacific region, where they believe there is less potential volatility. Finally, for some UHNWIs, the post-downturn timeframe has been an opportunity to review their advisor relationships. The greatest area of UHNWI growth has been in the world s emerging economies, particularly the so-called BRIC nations of Brazil, Russia, China, and India. Today, both China and Russia have more than 100 billionaires in their ranks, putting them second and third behind the U.S. But UHNWIs in these emerging markets are different from those elsewhere in the world. They are younger; the average age of the UHNWI in Russia is just 49 and in China it is 50. They are predominantly self-made, having been responsible for creating their own wealth. They remain involved in their businesses. But they are still determining what they will do with their wealth, trailing other markets in areas such as philanthropy, for example. There are extremely strong family links among the UHNWIs studied. This is a global phenomenon present in nearly all markets, with a few notable exceptions such as Russia. In many societies, keeping family close is a priority, as they have their children and other family members involved in their businesses. Still, as generations pass, some conflicts can arise, particularly when investments are managed by a family office. Philanthropy and charity remain priorities for many UHNWIs as they look for ways to create a more lasting legacy and have a greater impact on society. In three quarters of the markets studied, more than 40% of the UHNWIs fund their own charitable foundation, or run a charitable foundation founded or started by other family members. Yet this is not yet universal. China remains a significant outlier, as only 7% of UHNWIs have foundations. But efforts are underway to encourage greater giving and philanthropy from the emerging Chinese billionaires. Having made their marks in the business world, some UHNWIs see their next steps as shaping policy and debate in the public sector. Tracking the political activity of the world s richest people is difficult. In some nations such as the U.S. or India, many UHNWIs individuals are open in their support of certain political causes, and some billionaires have turned from business to politics. But elsewhere in the world (such as in Europe), UHNW individuals have been less open in their political involvement, either not being involved or keeping their positions unknown. Despite being global citizens, many UHNWI maintain citizenship and residence in the same country. The figure is over 90% for most markets studied. The biggest outlier is Hong Kong still maintaining its image as a haven for global wealth where 28% of the UHNW individuals studied hold citizenship and residence in different countries. Copyright Forbes

5 The Lingering Impact of the Global Downturn Nobody was untouched by the global recession of , and the effect of the downturn lingered into 2010 for some UHNWIs. Still, the overall impact wasn t just related to the value of portfolios. Certainly those were affected, but, for many UNHWIs, the biggest shift may have been related to their investing attitudes and actions. Based on conversations and interviews with UHNWIs across the globe, as well as with some of their advisors, many of the world s wealthiest were stung by the downturn, but not to the same extent as other investors. (Most of these interviews were conducted on the condition that they would be used for background and that information not be attributable to the individual.) In the words of a U.S.-based technology investor: The thing to consider is that in this downturn, it wasn t just a few assets, it was nearly all asset classes. So everyone got burned nearly equally. Still, the recession has influenced how some of these UHNWIs are investing today, and how they interact with their advisors, as the anecdotes below describe: A speedy recovery Many of the UHNWIs interviewed indicated they felt their investments had recovered more quickly after the downturn than perhaps the general public had. In some cases, they felt their advisors had helped them move away from the more volatile real estate and public markets prior to the depth of the downturn, and encouraged them to return to some of those investments at the right time. I ve done well, said one U.S.-based investor in charge of his family s office. I feel we saw what was coming and moved away at the right time. Lowering risk, but fearing inflation UNHWIs, almost as a rule, are often more moderate risk takers, focused more on wealth preservation and strategic growth rather than high-return/high-risk investment. Following the recession, some of those interviewed who had dabbled with higher-risk investments such as hedge funds were retreating from those in favor of more mainstream equities. The biggest concern many of the UHNWIs is inflation. Our advisors have been warning us about the risk of inflation, said a second-generation Europe-based manufacturer. It makes sense to prepare for it. While he would not disclose his specific investing plan, he did allude to moving away from the dollar. Looking at developing nations As they assess their investment portfolios, some of the UHNWIs interviewed are examining putting a greater share of their capital into emerging markets, particularly in the Asia Pacific area. While investments in emerging markets also fell during the economic downturn, they were not as volatile as those in developed markets, and they recovered more quickly, said one interviewee. Noted a U.K.-based investment advisor for UHNWIs, The emerging markets as a whole are growing at a 7 percent clip. The developed countries have enormous debt whereas the emerging nations have healthy balance sheets. The advisor added that he has recommended building portfolios that decouple the emerging world with the developed world. I believe that s going to play a role in nearly all strategic wealth management. Turnover in investor relationships It s hard to say whether it is attributable to the post-downturn hangover or simply a matter of it being an opportunity to shake things up, but a number of UHNWIs indicated they were assessing new advisor relationships, or looking to restructure their existing investment advisor roster. For one UHNWI who made his money in the U.S. retail industry, its nothing more than a matter of regular due diligence. I m not looking to have different brokerage advisors compete against each other, but I want to be sure that the people I work with are the best at executing my investment strategy. As he has rebalanced his assets to achieve his goals, he s also replaced a couple of his advisors because their areas of expertise no longer fit the portfolio s approach. Or as another UHNWI indicated, There s been some churn in relationships because sometimes, it s just time for a change. Copyright Forbes

6 Emerging Wealth from Emerging Markets Few economic developments have compared to the meteoric growth of China both as a global industrial powerhouse, and as a creator of unprecedented wealth for those entrepreneurs, industrialists, and investors who have succeeded over the past decade. While other economies contracted during the global credit crisis, China remained strong and vibrant, and today it leads the so-called BRIC nations Brazil, Russia, India and China as the greatest areas of growth for UHNWIs. Consider some recent numbers: In the 2011 Forbes billionaire s list, the BRIC nations produced more than half of the new billionaires to join the ranking. Until the past 12 months, no nation other than the U.S. was home to more than 100 billionaires today China has 115 and Russia 101. The analysis shows that UHNWIs in these emerging markets while they have much in common with their counterparts elsewhere in the world also have a number of unique characteristics. Emerging market UHNWIs are generally younger The average age of the UHNW individual in Russia is 49 and is 50 in China. (Fig. 1) Compare that to more established economies such as the U.S., where the average age of a UHNWI is 66, or France, where it is 74. In other words, emerging market UHNWIs are often just establishing themselves, so their overall influence and activity will likely continue for an additional decade or two. Their wealthy status has just begun, and the long-term impact is likely to be sizable. Emerging market UHNWIs are self-made Entrepreneurship is alive and well in the BRIC nations, and is paying off handsomely for those that have succeeded. 100% of the UHNWIs studied in Russia are self-made meaning every single one was responsible for creating their own wealth and did not inherit it. Figure 1: Average age of UHNWIs, by country 74 The ultra-rich in emerging markets are making their fortunes at a younger age than UHNWIs in the West. China s and Russia s wealthy are, on average, 15 years younger than their counterparts in the U.S., U.K. or Germany France Brazil Hong Kong Germany U.S. U.K. Mexico Singapore Middle East India China Russia Copyright Forbes

7 While Russia may be an extreme in that area especially given its political history over the past 90 years other wealthy individuals in the BRIC nations have been similarly entrepreneurial. In China, two thirds (66%) of the UHNWIs studied were self-made. For India, that figure is 65%, and for Brazil it is 67%. The impact of this entrepreneurialism is further evident in the ongoing involvement of these individuals in their businesses (see below), and what is likely to be a continued expansion of their wealth based on their desire for ongoing success. BRIC UHNWIs are involved in their business Whereas UHNWIs and entrepreneurs in some western markets appear eager to sell their companies once they are successful, most of those in the BRIC nations remain actively involved with their businesses. This may be because they are younger and not yet ready to take a more passive role. Or it may be attributable to the high growth trajectories for many of these companies, and the desire of the leaders to see that growth through. Among the UHNWIs studied, 93% of Russian UHNW individuals, and 85% of Chinese UHNWIs are employed full time, meaning they are in control of, directing, or running their companies. The figures for India and Brazil are 78% and 75%, respectively. Emerging market UHNWIs are still determining how to give back Philanthropy is a mixed bag among UHNWIs in emerging markets. For many, determining how or when to give For UHNWIs in emerging markets, determining how to give money away may be more difficult than earning it. money away has been more difficult than earning it. As this new generation of titans emerges, it is unclear whether they will be as committed to giving back their wealth as some of their western counterparts have been. For instance, just 7% of Chinese UHNWIs analyzed in the study have their own charitable foundations, a far cry from the 55% that do so in the U.S. It may be premature to say that these individuals will not be philanthropic, however, as many may see themselves as being at the stage of building their wealth. There are also social and political issues that are unique to these markets that are affecting giving strategies for example, is philanthropy seen as a way to help a nation s people, or is that a role for the government? Ultimately, how a select number of UHNWIs in emerging markets approach philanthropy may end up guiding others. These nations have yet to have their Carnegies or Rockefellers to usher in their ages of philanthropy. Still a Man s World Gender diversity has not yet come to the world of ultra-high net worth. In most of the markets studied, UHNW individuals are predominantly male. Of the markets studied, the ones with the highest percentage of female UHNW individuals were Hong Kong (23%) and Germany (17%). In most other markets, more than 90% of UHNW were male. Copyright Forbes

8 Managing Family Involvement There are extremely strong family links among the UHNWIs studied. This is a global phenomenon, and it is present in nearly all markets, with a few notable exceptions such as Russia. Clearly, in certain societies, keeping family close is a priority, and UHNWIs in these countries are more likely to have children or other family members working in the business. (Fig. 2) More than half of UHNWIs from the Middle East have their children involved in their businesses, and a similar percent have other family members involved (note that a person can have both children and other family members employed). Similarly, in India, 58% of UHNWIs have their children working with them. Within many of these developing nations, one person s wealth is often seen as something to be shared a legacy that can enrich both the immediate and the extended family. In our culture, family still comes first. Wealth becomes a way to bring everyone closer together, said a wealthy finance executive from Latin America. It is important to share our advantages with those closest to us. But involving family in wealth strategies certainly comes with its challenges. Once a family has significant wealth, the problem becomes how to preserve it for future generations. This is often a surprisingly difficult task, as it may require the family to tackle personal issues as much as they need to deal with investment and financial uncertainties. Figure 2: Family in Business Brazil China France 25 Germany Hong Kong 30 India 37 Mexico 11 Middle East Russia 8 17 Singapore U.K. UHNWIs in India, Hong Kong, the Middle East, and France are most likely to have children involved in their business, while those in Mexico, the Middle East, and Singapore involve other family. U.S % 50% 100% Children in Business Other Family in Business Copyright Forbes

9 To manage such conflicts, many UHNWIs turn to a single-family office (SFO), a professional organization dedicated specifically to managing their personal fortunes. While SFO involvement was not directly analyzed in the Forbes wealth list data, other studies have looked at the issues and characteristics of the SFO. According to a 2009 study from the Wharton Global Family Alliance, SFOs and the families behind them are generally entrepreneurial, insofar as the families involved are often still majority shareholders involved (similar in profile to the UHNWIs from the Forbes list). These families tend to view their SFOs as private investment services, more focused on maintaining and growing wealth than on softer services a hedge fund expert shouldn t be distracted by having to deal with domestic staff issues. In our culture, family still comes first It is important to share our advantages with those closest to us. Issues in the Family Office For a second-generation European business owner, managing multigenerational wealth through a single-family office is at times both a godsend and a curse. It both eases some of the issues related to investing and growth of the family fortune, but it also sets up a number of conflicts as different segments of the family have different opinions regarding allocation and risk profiles. Our goal for the past several decades and going forward has been to manage our wealth independently so that the principals have enough time to devote to the business, said the executive. Staffing our office with professionals that don t have a direct link to the family has been beneficial. He added that the group has a staff of 9, including tax advisors and legal counsel. Still, he has found that as a third generation has become more involved in the SFO s business and now sits on its committees, it is becoming increasingly necessary to outsource some of its functions. For example, the group recently decided to restaff its investing team to focus its expertise primarily on private equity placements (they used a unique performance bonus structure to lure a high-performer into the organization). Other portfolio matters are being contracted with several independent investment professionals. We try to have a long-term investing vision and adhere to investing best practices, he added. This helped the family ride out the 2009 downturn, and will help them find value in their future investments. Copyright Forbes

10 Globally, many expect the biggest growth in family offices to occur in Asia, as UHNWIs in that region who have gained their wealth over the past two decades look to come up with ways to pass it on to the next generation. We ve been pretty unsophisticated investors compared to Americans and Europeans, said a Singapore-based investor specializing in biotech. Wealthy Asians need to look for ways to grow their assets and preserve them for future generations. The importance of using services such as an SFO or private bank is further demonstrated by understanding the source of the UHNWI s wealth. Entrepreneurial activity still drives most wealth creation in both emerging and established markets as most UHNWIs fall into the category of self-made wealth. Entrepreneurial activity still drives the vast majority of wealth creation in most markets the defining characteristic of the self-made individual. In half the markets studied Brazil, China, India, Russia, the U.K., and the U.S. more than 60% of the UHNWIs were self-made, meaning that they earned their wealth through the success and growth of their business ventures. But even in those markets where the majority of UHNWIs received their wealth through inheritance, many are actively involved in growing that financial legacy. (Fig. 3) For example, in France, two thirds of the UHNWIs inherited their wealth, but half are actively involved today in growing the fortunes. Similarly, in the Middle East, 42% of UHNWIs inherited their fortunes, but are still looking to grow them. Figure 3: Source of Wealth Brazil 66 6 China France Germany 36 Hong Kong 48 India 65 Mexico 56 Middle East 42 Russia Singapore U.K. 80 U.S Self Made Inherited Inherited and Growing Other Copyright Forbes

11 Creating a Philanthropic Legacy In 2010, many UHNWIs were issued a challenge: increase their charitable giving and develop a way to return their wealth to charitable causes. The Giving Pledge kicked off by Warren Buffet and Bill and Melinda Gates is an effort to have the wealthiest individuals and families in America commit to giving the majority of their wealth to the philanthropic causes and charitable organizations of their choice either during their lifetime or after their death. The goal: have those who have been most fortunate make a moral commitment to give, and through their generosity make the world a better place. More than 50 of the wealthiest U.S. individuals and families have taken the pledge. And the challenge has been extended overseas, as Buffet and Gates traveled to China to share their experiences with philanthropy with the wealthy entrepreneurs from that emerging nation. Philanthropy and charity have long been part and parcel with ultra high net worth, as individuals look for ways to create a more lasting legacy and have a greater impact on society. The analysis of the Forbes data suggests that this is still true. In three quarters of the markets studied, more than 40% of the UHNWIs fund their own charitable foundation, or run a charitable foundation founded or started by other family members. (Fig. 4) And in seven of the markets, more than 40% of the UHNWIs gave other substantial charitable contributions; that is, made donations outside of their foundations, or made sizable donations without having their own or a family foundation. While many think of philanthropy as an American notion people in the U.S. give more to charity than Figure 4: Charitable Foundation Brazil China 7 35 France Germany 45 Hong Kong India Mexico Middle East 58 Russia Singapore U.K. In most markets studied, foundations and charitable giving is part of the legacy UHNWIs are trying to create, but the ultra-rich in emerging markets have some catching up to do. U.S % 50% 100% Charitable Foundation Other substantial charitable giving Copyright Forbes

12 people in any other country clearly giving has become global in nature. In the U.S., 55% of UHNW individuals studied operate charitable foundations, and of those that do not, nearly three quarters recorded substantial charitable donations. Yet even more UHNWIs operate foundations in the U.K. (57%) and France (58%). And in the Middle East, where Sharia law often directs charitable contributions, 63% of UHNWIs fund a charitable foundation. Even in the emerging market of India, 48% of UHNWIs have a charitable foundation. Consider, for example, Wipro founder Azim Premji, who has pledged much of the fortune he made through his information technology company to his foundation, which currently is focused on improving public education in India. As noted earlier, China remains an outlier in the area of philanthropy, as just 7% of Chinese UHNWIs have a foundation, and 35% make some sort of other substantial charitable giving. There remains great cultural hesitancy in that country to making a charitable pledge. For instance, Confucian values call for people to take care of their families first, which is often considered a reason why Chinese UHNWIs leave wealth for their descendents. In fact, when Buffet and Gates visited, they had to issue an official letter to the state news agency to clarify that attendees at their event would not be asked to donate anything. But that could be changing. After the visit by Buffet and Gates, several Chinese entrepreneurs changed direction. Chen Guangbio, a recycling entrepreneur with a fortune estimated at more than $400 million, announced on his company s website that he planned to give all his money away. Others could follow his lead. Philanthropy Keeps a Legacy Alive One could argue that the most valuable and enduring assets of a multigenerational family are its shared values, its reputation, and its place in society. Evidence of its good work can serve as a magnet to draw individual family members together and provide direction for the future. Nowhere is this truer than in the family charitable foundation of the descendents of an American industrialist who made his fortune more than 60 years ago. Based in a midsize city, the foundation actually an amalgam of several foundations run by different branches of the family has two key points of focus: maintain and grow its endowment, and support the kinds of causes the family s patriarch would have supported during his lifetime, according to a family board member. Maintaining and growing the endowment, the board member said, comes via the family s commitment to supporting their foundations. The commercial side of the family fortune has shifted from manufacturing to investing, including commercial real estate and private equity investment. While those investments are not part of the foundation s endowment, their ongoing success provides the funds, the board member added. In terms of causes, the foundation s charter calls for it to support areas of social equality, cultural enrichment, and local causes, including medical research and education. It is important for us to maintain what our family stands for, the board member said. Our wealth came via inheritance, but our true legacy is really about what we continue to do with it. Copyright Forbes

13 Finding Success in Public Service Philanthropy is one way UHNWIs can give back to society. Another way is through activity in the public sector. A growing number of entrepreneurial UHNWIs, having made their fortunes in business, have turned to politics to take their success in the private sector and bring it to public service. Consider the number of high-profile billionaires that have turned from business to politics. New York City mayor Michael Bloomberg made his fortune via his namesake information services and media company. Lebanese prime minister designate Najib Mikati co-founded the telecommunications company Investcom. In most cases, these are not individuals who are looking to further enrich themselves via the public sector, or see political involvement as a way to improve the standing of their businesses. Rather, many see it as a way to shape the debate on critical issues, and use their business experience for public service. Still, tracking the political activity of the world s richest people is difficult. The Forbes Insights research defines political involvement as those individuals who have donated money to a political party in a manner that is recorded in public record; have been known to attend political fundraisers; have served on or in a government cabinet, task force, or partnership on the local, federal or international level; have attended global economic conferences sponsored by governing bodies; or have run for or served in elected office. Many UHNWIs see political involvement as a way to shape public debate and use their business experience for public service. Copyright Forbes

14 While this definition can identify some of the political involvement of UHNWIs, information to back up all involvement is not always available. (Fig. 5) As a result, the figures for those who are While political involvement of UHNWIs is not easy to track, wealthy individuals in the U.S., India, and the Middle East are among the most active. not politically involved include both UHNWIs who noted that they remain politically neutral as well as those for whom no data is available. Thus, it is possible that some are politically active on some level, but data cannot be found either due to country disclosure laws or dearth of public information. In nations studied, political activity among UHNWIs is most common in the Middle East (74%), the U.S. (52%), and India (48%). In the Middle East, the high rate of political involvement may be due to the concentration of wealth of the ruling families, and the political appointment of members of these families in the countries studied (the United Arab Emirates, Saudi Arabia, Kuwait, and Lebanon). For example, prime minister of Kuwait, Sheikh Nasser Al-Sabah, is the nephew of the emir Sheikh Sabah Al-Ahmad Al-Jeber Al-Sabah. It is this kind of concentration of wealth and political power that led to some of the protests and democracy demonstrations in countries such as Bahrain in In the U.S. and India, political involvement and political donations may come from the increasing expense of running a political campaign. In the U.S., political fundraising has been well documented, and the courting of wealthy individuals is part of the ongoing process. In India, electioneering has also become dominated by candidates desires to outspend their rivals as they run for office. This trend also accounts for the lower levels of political involvement in certain European countries, where elections may be publically financed, and privacy laws limit political disclosures. Figure 5: Political Involvement Brazil 13 China 6 France 17 Germany 2 Hong Kong 35 India 48 Mexico 33 Middle East 74 Russia 20 Singapore 15 U.K. 9 U.S. 52 Yes No/Unknown Copyright Forbes

15 Global Citizens Who Stay Put UHNWIs are the stereotypical global citizens. Given their wealth and the global nature of their investments and interests, many are likely to maintain multiple residences and conduct business and across the world. For example, one UHNWI interviewed for this study is a U.S. citizen. His office is based in the U.K., and he maintains residences in both London and New York, where his family resides. His primary area of investment specialty, however, is real The vast majority of UHNWIs have residence in their country of citizenship, but Hong Kong and the U.K. still attract the ultra-rich from elsewhere in the world. estate in developing markets, particularly in India and now Hong Kong, and he operates out of offices in those nations as well. Still, the vast majority UHNWIs individuals maintain citizenship residence in the same country. (Fig. 6) In two thirds of the markets studied, more than 90% of UHNWIs hold citizenship and residence in the same country. For Mexico and the Middle East, all of the UHNWIs studied live and reside in those regions. In the U.S., the figure is 97%. The biggest outlier is Hong Kong still maintaining its image as a haven for global wealth where 28% of the UHNW individuals studied hold citizenship and residence in different countries. In the U.K., where UHNWIs from elsewhere in the Commonwealth often maintain residence, 17% of the individuals studied hold citizenship and residence in different countries. Figure 6: Citizenship of UHNWIs Brazil China France Germany Hong Kong India Mexico Middle East Russia Singapore U.K. U.S Holding Citizenship and Residence in Same Country Holding Citizenship and Residence in Different Countries Copyright Forbes

16 conclusion Emerging Wealth, Emerging Markets, Emerging Opportunities There has been a significant shift in how wealth is distributed around the globe, as so-called emerging markets have come forward as the fastest growing markets for the ultrarich, perhaps at the expense of more established wealth in western Europe. Driven by strong entrepreneurism and meteoric growth in countries such as China, India, and Russia, these newly minted UHNWIs are creating a new demographic wealth profile. Consider, for example, the profile of the average UHNWI in China. This person is young (just hitting 50), self-made, entrepreneurial, and continues to be focused on building wealth. At the same time, the Chinese UHNWI may not yet be comfortable with wealth, and is still figuring out how to affect society through philanthropy. The impact of this geographic shift in wealth could be long-lasting. Not only do these markets make billionaires, but they are also are attracting the investments of other UHNWIs seeking stable growth opportunities. This strong funding could further spur economic growth in the emerging markets, creating even more innovation and wealth for the most successful entrepreneurs. And emerging market money will also be fueling the growth of wealth in western markets consider how Russian entrepreneur and venture capitalist Yuri Milner has invested in successful U.S. Internet properties such as Facebook, Zynga, and Groupon, whose owners themselves are billionaires. Still, challenges exist. The concentration of wealth in countries such as India and China where significant poverty also exists may need to be watched closely. In India, for instance, concerns have been voiced that major familybased corporations wield disproportionate influence over markets. Local governments in China are looking for ways to expand the standard of living for its emerging middle class. The concern: to avoid chances of social unrest. Ultimately, the influence of this shift will be felt for years to come. Older, established wealth could be usurped by the emerging market billionaires. Philanthropic giving by these emerging market UHNWIs could change the specter of poverty into opportunity in these markets and create a lasting legacy. Methodology The information in this study is based on an exclusive analysis of ultra-high-net-worth individuals in 12 markets conducted by Forbes Insights. The markets studied were: Brazil, China, France, Germany, Hong Kong, India, Mexico, the Middle East (United Arab Emirates, Saudi Arabia, Kuwait, Lebanon), Russia, Singapore, the U.K., and the U.S. Using the Forbes Magazine list of the world s wealthiest individuals from 2010, Forbes Insights evaluated trends and developments of UHNW individuals against a number of key criteria, including company ownership, citizenship and residence, source of wealth, employment status, family business involvement, charitable foundations and giving, and political involvement. The minimum net worth of the individuals studied was US$1 billion or local currency equivalent in all markets. There were three exceptions: India ($500 million minimum), China ($425 million minimum), and Singapore ($190 million minimum). In addition, 17 interviews were conducted with UHNWIs in the countries studied. Each person interviewed had at least US$60 million in net investable assets. Many of the interviews were conducted off the record, but the insights they provided were used to help shape the analysis of the data. Others were conducted not for attribution, in order to protect the privacy of the individual interviewed. Christiaan Rizy Director Stuart Feil Editorial Director Brenna Sniderman research Director Clara Knutson Researcher Copyright Forbes

17 Appendix A Ultra High Net Worth Individuals by Country Brazil (n=18) Company Ownership Private holding 22% Public holding 78% Citizenship & Residence in same country 89% in different countries 11% Gender Male 94% Female 6% Average Age Age 68 Source of Wealth Self made 66% Inherited 6% Inherited and growing 28% Other 0% Employment Status Full-time 75% Retired 6% Full-time investor 6% Other 13% Charitable Foundation Yes 38% No/None found 63% Other substantial charitable giving (total) 44% Family in Business Children in business 11% Other family in business 14% Political Involvement Yes 13% No/Unknown 87% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $27,000 Copyright Forbes

18 China (n=400) Company Ownership Private holding 32% Public holding 64% Citizenship & Residence in same country 94% in different countries 6% Gender Male 96% Female 5% Average Age Age 50 Source of Wealth Self made 65% Inherited 1% Inherited and growing 20% Other 14% Employment Status Full-time 85% Retired 2% Full-time investor 2% Other 2% Charitable Foundation Yes 7% No/None found 94% Other substantial charitable giving (total) 35% Family in Business Children in business 12% Other family in business 27% Political Involvement Yes 6% No/Unknown 94% Net Worth Range Min net worth ($mil) $425 Max net worth ($mil) $8,000 Copyright Forbes

19 France (n=12) Company Ownership Private holding 17% Public holding 83% Citizenship & Residence in same country 91% in different countries 9% Gender Male 92% Female 8% Average Age Age 74 Source of Wealth Self made 33% Inherited 17% Inherited and growing 50% Other 0% Employment Status Full-time 58% Retired 25% Full-time investor 0% Other 17% Charitable Foundation Yes 58% No/None found 42% Other substantial charitable giving (total) 33% Family in Business Children in business 50% Other family in business 25% Political Involvement Yes 17% No/Unknown 83% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $27,500 Copyright Forbes

20 Germany (n=53) Company Ownership Private holding 74% Public holding 26% Citizenship & Residence in same country 81% in different countries 19% Gender Male 83% Female 17% Average Age Age 66 Source of Wealth Self made 36% Inherited 32% Inherited and growing 32% Other 0% Employment Status Full-time 49% Retired 19% Full-time investor 4% Other 9% Charitable Foundation Yes 45% No/None found 36% Other substantial charitable giving (total) 64% Family in Business Children in business 19% Other family in business 34% Political Involvement Yes 2% No/Unknown 98% Net Worth Range Min net worth ($mil) $1,200 Max net worth ($mil) $23,500 Copyright Forbes

21 Hong Kong (n=40) Company Ownership Private holding 33% Public holding 68% Citizenship & Residence in same country 72% in different countries 28% Gender Male 78% Female 23% Average Age Age 68 Source of Wealth Self made 48% Inherited 5% Inherited and growing 19% Other 28% Employment Status Full-time 83% Retired 13% Full-time investor 0% Other 5% Charitable Foundation Yes 43% No/None found 58% Other substantial charitable giving (total) 30% Family in Business Children in business 55% Other family in business 30% Political Involvement Yes 35% No/Unknown 65% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $24,000 Copyright Forbes

22 India (n=100) Company Ownership Private holding 15% Public holding 85% Citizenship & Residence in same country 94% in different countries 6% Gender * Male 75% Female 5% Average Age Age 60 Source of Wealth Self made 65% Inherited 17% Inherited and growing 18% Other 0% Employment Status Full-time 78% Retired 10% Full-time investor 1% Other 11% Charitable Foundation Yes 48% No/None found 52% Other substantial charitable giving (total) 24% Family in Business Children in business 58% Other family in business 37% Political Involvement Yes 48% No/Unknown 52% Net Worth Range Min net worth ($mil) $500 Max net worth ($mil) $27,000 *Gender could not be identified for remaining 25% Copyright Forbes

23 Mexico (n=19) Company Ownership Private holding 42% Public holding 58% Citizenship & Residence in same country 100% in different countries 0% Gender Male 100% Female 0% Average Age Age 64 Source of Wealth Self made 55% Inherited 33% Inherited and growing 11% Other 0% Employment Status Full-time 78% Retired 0% Full-time investor 11% Other 11% Charitable Foundation Yes 44% No/None found 44% Other substantial charitable giving (total) 56% Family in Business Children in business 11% Other family in business 56% Political Involvement Yes 33% No/Unknown 67% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $53,500 Copyright Forbes

24 Middle east (n=19) Company Ownership Private holding 42% Public holding 58% Citizenship & Residence in same country 100% in different countries 0% Gender Male 100% Female 0% Average Age Age 61 Source of Wealth Self made 42% Inherited 16% Inherited and growing 42% Other 0% Employment Status Full-time 68% Retired 11% Full-time investor 11% Other 0% Charitable Foundation Yes 63% No/None found 37% Other substantial charitable giving (total) 58% Family in Business Children in business 53% Other family in business 53% Political Involvement Yes 74% No/Unknown 26% Net Worth Range Min net worth ($mil) $1,100 Max net worth ($mil) $19,400 Copyright Forbes

25 Russia (n=62) Company Ownership Private holding 53% Public holding 47% Citizenship & Residence in same country 93% in different countries 7% Gender Male 98% Female 2% Average Age Age 49 Source of Wealth Self made 100% Inherited 0% Inherited and growing 0% Other 0% Employment Status Full-time 93% Retired 1% Full-time investor 1% Other 5% Charitable Foundation Yes 26% No/None found 74% Other substantial charitable giving (total) 52% Family in Business Children in business 8% Other family in business 17% Political Involvement Yes 20% No/Unknown 80% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $15,800 Copyright Forbes

26 Singapore (n=40) Company Ownership Private holding 30% Public holding 70% Citizenship & Residence in same country 93% in different countries 7% Gender * Male 30% Female 3% Average Age Age 62 Source of Wealth Self made 13% Inherited 3% Inherited and growing 10% Other 74% Employment Status Full-time 63% Retired 15% Full-time investor 8% Other 15% Charitable Foundation Yes 43% No/None found 58% Other substantial charitable giving (total) 13% Family in Business Children in business 25% Other family in business 45% Political Involvement Yes 15% No/Unknown 85% Net Worth Range Min net worth ($mil) $190 Max net worth ($mil) $7,800 *Gender could not be identified for remaining 67% Copyright Forbes

27 United Kingdom (n=29) Company Ownership Private holding 83% Public holding 17% Citizenship & Residence in same country 83% in different countries 17% Gender Male 90% Female 7% Average Age Age 65 Source of Wealth Self made 80% Inherited 10% Inherited and growing 10% Other 0% Employment Status Full-time 71% Retired 17% Full-time investor 6% Other 6% Charitable Foundation Yes 57% No/None found 43% Other substantial charitable giving (total) 49% Family in Business Children in business 11% Other family in business 14% Political Involvement Yes 9% No/Unknown 91% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $12,000 Copyright Forbes

28 United States (n=400) Company Ownership Private holding 74% Public holding 26% Citizenship & Residence in same country 97% in different countries 3% Gender Male 90% Female 11% Average Age Age 66 Source of Wealth Self made 68% Inherited 18% Inherited and growing 13% Other 1% Employment Status Full-time 76% Retired 11% Full-time investor 9% Other 4% Charitable Foundation Yes 55% No/None found 45% Other substantial charitable giving (total) 50% Family in Business Children in business 21% Other family in business 28% Political Involvement Yes 52% No/Unknown 48% Net Worth Range Min net worth ($mil) $1,000 Max net worth ($mil) $54,000 Copyright Forbes

29 Appendix B Research Definitions For analysis purposes, the following definitions were used to categorize ultra-high-net-worth individuals studied for this report: Employment Full-time: Includes individuals who are still in control of, directing or running their company, as well as those who may have ceded day-to-day control of their company to others but still remain as an active and functioning chairman of the board. by other family members such as a parent or sibling; and those whose companies run charitable foundations (though in these cases, the individual in question must own or run that company). Retired: Includes only those individuals who have officially retired from day-to-day engagement with a company and no longer serve on their company s board, or who serve in an honorary or emeritus capacity, and who do not hold any other roles at any other for-profit organizations. Although they may still hold stakes in other companies or hold other investments, they are not actively acquiring new stakes or getting involved in any new ventures. Full-time investor: Includes only those who are full-time investors of their own wealth, or their family s wealth. No/None found: Includes those without a charitable foundation as defined by above, as well as those for whom this information could not be found. Other charitable giving: Includes those who either hold a role on the board of a charitable foundation not owned or run by themselves, their family, or their company; those who have made a significant donation to a charitable organization; and/or those who make philanthropy and giving a large part of their lives either outside their own foundation or in lieu of their own foundation. Other: Includes those who may no longer serve in a day-to-day capacity at their company and no longer serve on their company s board; or who serve in an honorary or emeritus capacity, but who are also active members on other company boards; who run their own charitable foundation(s); are now serving in public or elected office; are in the process of starting another company; are running or serving as a guiding force at another company separate from the one at which they made or grew the bulk of their wealth; are deceased since the data was completed; or who are not necessarily retired but made their wealth through family inheritance and not through their career or employment. Also includes families who are listed as among the wealthiest. Political Involvement Politically involved: Includes those who have donated money to a political party in a manner that is recorded in public record; have been known to attend political fundraisers; have served on or in a government cabinet, task force, or partnership on the local, federal or international level; have attended global economic conferences sponsored by governing bodies; have run for or served in elected office; have been appointed to office; may be noted in reports as having suspected political ties or having been suspected of being politically well-connected ; or who have a spouse, sibling, parent or child who has run for, or served in, office, or is currently serving in office. Charitable Foundation Has a charitable foundation: Includes individuals who have funded and own/run their own charitable foundation; those who have funded their own charitable foundation and allow it to be run by family members or a staff of professionals; those who continue to run charitable foundations founded or started No/Unknown: Includes those who note that they remain politically neutral as well as those for whom no data is available. Thus, it is possible that some are politically active on some level as defined above, but data cannot be found either due to country disclosure laws or dearth of public information. Copyright Forbes

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