Trends in Global Private Wealth

Every year, The Boston Consulting Group, a global management consulting firm, publishes a report on the global wealth-management industry. The report sheds light on the state of wealth in the world, whether it's growing or not, and where the growth or contraction is coming from. Today, I'll offer a brief summary of the 2012 report's most interesting findings.

Global private wealth grew in 2011
The amount of private wealth in the world grew by 1.9% in 2011 to $122.8 trillion. While this figure was lower than in either 2009 or 2010 -- when global wealth grew by 9.6% and 6.8%, respectively -- it nevertheless was positive.

Region

Private Financial Wealth (Trillions)

Growth From 2010

World $122.8 1.9%
North America $38.0 (0.9%)
Western Europe $33.5 (0.4%)
Japan $17.8 (2.0%)
Latin America $3.5 10.6%
Middle East & Africa $4.5 4.7%
Asia-Pacific $23.7 10.7%

Source: The Boston Consulting Group.

The growth came principally from the developing world, which saw its base of private wealth grow a combined 10%. Net worth in the BRIC countries increased a staggering 18.5%. And in terms of regions, the biggest winner was Asia. Excluding Japan, wealth in the Asia-Pacific region grew by 10.7%.

Much of this combined increase came from newly created wealth as opposed to the appreciation of existing assets. For instance, GDP in the developing world increased by 11.3% last year, whereas the corresponding equity markets were down 11.7%.

Alternatively, the amount of private wealth held in the developed world contracted by 0.9%. Japan led the way with a decline of 2%, followed by North America with a contraction of 0.9%, and finally Western Europe, which decreased by 0.4%.

The primary source of contraction in the Western world was the deterioration of the equities markets -- both public and private. All told, equities in developed countries lost 12.2% of their value.

Here in the United States, for instance, the financial sector suffered the worst of it. An exchange-traded fund that tracks the sector, the Financial Select Sector SPDR (NYSE: XLF  ) , recorded a 19% loss. The banks fared particularly poorly, declining by 24% according to the KBW Bank Index (INDEX: ^BKX  ) . Bank of America (NYSE: BAC  ) alone suffered a 60% decline.

And the story was the same in Europe. Equity markets in Greece fell 52%, evidenced by, among others, Greek shipping company DryShips (Nasdaq: DRYS  ) , which fell by 60%.

The creation and destruction of millionaires
One of the more interesting sections in the study concerned the allocation of wealth, and the creation and destruction of millionaires.

In terms of wealth allocation, an estimated 61% of the world's private wealth is held by households with less than $1 million in net worth, 34% is held by households with a net worth between $1 million and $100 million, and 6% is held by households that are worth in excess of $100 million.

Region

Proportion of Wealth Held by Households Worth Less Than $1 Million

Proportion of Wealth Held by Households Worth Between $1 Million and $100 Million

Proportion of Wealth Held by Households Worth More Than $100 Million

World 61% 34% 6%
North America 47% 47% 6%
Western Europe 75% 18% 7%
Japan 77% 23% 1%
Middle East & Africa 47% 44% 9%
Latin America 63% 25% 12%
Asia-Pacific 52% 43% 5%

Source: The Boston Consulting Group.

By this measure, Japan is by far the most egalitarian, with 77% of its private wealth held by households in the lowest strata and only 1% held by the highest. And tellingly, the distribution of wealth in the United States is most like that in Africa and the Middle East.

The trend in millionaires unsurprisingly tracks the geographically bifurcated nature of wealth creation and destruction. All told, the total number of millionaire households in the world reached 12.6 million by the end of 2011, representing about 0.9% of the study's sample.

The number of millionaire households in the United States and Japan decreased by 129,000 and 53,000, respectively. Meanwhile, the number of millionaires in China increased by 193,000.

The country with the highest proportion of millionaires is Singapore, with 17.1% of its households recording a net worth of at least $1 million. Perhaps that's the reason Facebook co-founder Eduardo Saverin decided to relocate there, so he could be among his peeps.

Foolish bottom line
The results of the Boston Consulting Group study shouldn't be a huge surprise to most people. We've known for a while now that the developed world is struggling and the developing world is on the ascent. What's great about studies like these, however, is that they provide cold, hard facts and figures to otherwise anecdotal observations.

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Fool contributor John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Facebook and Bank of America. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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