The Asia Pacific region has become the second most popular focus of investment for the wealthy, taking the place of Europe and is steadily g...

The Asia Pacific region has become the second most popular focus of investment for the wealthy, taking the place of Europe and is steadily gaining ground on North America, as wealth managers push client portfolios towards emerging markets in search of better returns. Asia Pacific investments represented 23 per cent of the total assets held by the world’s high net worth individuals last year, overtaking Europe, according to Merrill Lynch and Capgemini’s tenth anniversary World Wealth Report. High rates of growth in Asia were driven by strong stock market performances and vibrant GDP growth rates in the region, said the report. China and India sustained real GDP growth rates of 9.9 per cent and 8 per cent, respectively, in 2005, among the highest of any market. Parts of Eastern Europe and Latin America also posted real GDP growth rates that exceeded the 4.3 per cent global average. A spokesman for Merrill Lynch told WealthBriefing that a full wealth report concentrating on Asia is soon to be released, which shows the growing importance of the region to global wealth generation. “HNWIs are becoming increasingly open to both thinking and acting globally, as they steadily look beyond domestic markets to explore investment opportunities in the new and growth economies around the world and in more diversified investment solutions,” said Merrill Lynch. In contrast to the situation in Asia, HNWI’s are continuing to shift investments away from North America, which still remains the most popular, but which has suffered from lack of confidence in the dollar in 2004, for example. Even though the dollar bounced back in 2005, investors trimmed their North American allocations because of low returns. While market capitalisation growth rates slowed in 2005 compared to the previous two years, significant opportunity remained. Market capitalisation and benchmark index performance have grown rapidly in Eastern European, Asian- Pacific and Latin American markets, driven by ongoing foreign investment and strong corporate profits. South Korea, Denmark, South Africa and Japan were among the best-performing markets last year, providing new opportunities for HNWIs to cultivate their wealth. Commodity-producing nations such as Brazil, Mexico and Canada benefited from surging prices, as well as from a boost in the value of their currencies. Some smaller, less developed financial markets such as those of the United Arab Emirates, Romania and Singapore were also winners for HNWIs in 2005. South Korea had the greatest increase in the number of HNWIs, growing at a rate of 21.3 per cent. This was followed by India which saw increases of 19.3 per cent then Russia at 17.4 per cent. Wealthy individuals across these emerging markets showed an increased interest in equities and private equity, however there was a decline in the amount of money invested in hedge funds over the past two years. According to the report, HNWI’s in the Middle East saw their wealth grow at a rate of 19.7 per cent last year, the fastest in the world. The Middle East and Africa have continued to benefit from the global dependence on fossil fuel, which was thought to be the main driver of this rate of growth. The Middle East’s millionaires also showed a strong appetite for risk in 2005 resulting in much higher investments in equities and real estate.