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December 12, 2017

World’s richest 1% own more than 50% of global wealth

By Ronan Mccaughey

The world’s richest 1% now own just over half of global wealth, according to the latest Credit Suisse Research Ins tute’s Global Wealth Report.

The report said the super-rich own 50.1% of all household wealth in the world, as against 42.5% at the height of the nancial crisis in 2008. The downward trend reversed a er 2008 and the share of the top 1% has been on an upward path ever since, passing the 2000 level in 2013 and achieving new peaks every year therea er

The report noted that 3.5 billion people, equivalent to 70% of the world’s adults, hold just 2.7% of the world’s wealth. Each owns less than $10,000 in wealth in 2017.

In the past 12 months, total global wealth rose at a rate of 6.4% to reach $280trn. It is the fastest pace of wealth crea on since 2012. The rise in global wealth re ected widespread gains in equity markets and similar rises in non- nancial assets.

China, India and the eurozone also made major contribu ons to the new record level of global wealth, equivalent to $56,540 per adult.

The Credit Suisse report noted that North America and Europe together account for 64% of total household wealth in 2017, but contain only 17% of the adult popula on.

In the past, total global wealth in the two regions has o en been similar, with Europe’s greater popula on compensa ng for higher average wealth in North America. However, North America pulled ahead a er 2013, and now accounts for 36% of global wealth compared to 28% for Europe.

In the other regions, the share of wealth fails to match the popula on share. The discrepancy is modest in the Asia-Paci c region (excluding China and India), where 23% of global adults own 20% of global wealth. Elsewhere, the disparity between popula on and wealth is quite striking. Despite enormous gains this century, China accounts for 22% of the adult popula on of the world, yet only 10% of global wealth. The ra o is not much higher for La n America at 9% to 3%. But the popula on share exceeds the wealth share in India by a factor of almost 10, and the disparity is even greater in Africa.

Wealth per adult in Switzerland, meanwhile, has risen by 130% to $537,600 since the turn of the century. Switzerland today accounts for 1.7% of the top 1% of global wealth holders and over two-thirds of Swiss adults have assets above $100,000

The outstanding performance of China since 2000 is evident

from the Credit Suisse report, with wealth growing at annual rate of 12.5%, equivalent to a six-fold rise over the 17-year period. India has almost matched this record, growing faster than average even when allowance is made for popula on growth. These growth performances outstrip those of Europe and La n America, which are similar to the global average.

Over the last few years, the Credit Suisse report said wealth growth has undershot rela ve to its earlier trend. Credit Suisse’s Research Ins tute expects a similar pace of increase in the next ve years and es mates that it will reach $341trn by 2022. At the same me, it expects debt to grow more quickly a er a period of rela ve stability between 2007 and 2010.

According to the report, the number of millionaires will grow to a new all- me high of 44 million, while the number of UHNWIs is projected to reach 193,000. By 2022, the number of UHNWIs – those with wealth above $50m – will likely increase by 45,000 to reach 193,000 individuals, more than half of whom will reside in North America

The share of wealth of emerging markets will likely reach 22% by 2022, increasing their share by 0.4 percentage points on average each year. The annual rate of increase is projected to be 6.5% for emerging markets versus 3.3% for developed markets.

Speaking to PBI about how a hard Brexit may impact the UK’s wealth, Michael O’Sullivan, chief investment o cer, interna onal wealth management at Credit Suisse, said: “Sterling is the shock absorber of Brexit. If there is a hard Brexit, there will be a nega ve wealth impact.”

Asked if the report highlighted any winners and losers, O’Sullivan says the report shows that millennials have been unlucky, and need to focus on nancial planning.

The report notes: “Capital losses and high subsequent unemployment have dealt serious blows to young workers and savers. Add rising student debt in several developed countries, ghter mortgage rules a er 2008, higher house prices, increased income inequality, less access to pensions and lower income mobility and you have a ‘perfect storm’ holding back wealth accumula on by the millennials in many countries.”

The millennials’ challenge contrasts with the good fortune experienced by the baby boomers, born in large numbers between 1945 and 1964, whose wealth was boosted by a range of factors including large windfalls due to property and share price increases, notes the Credit Suisse report.

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