Never mind the credit crunch – for the global wealth management industry, its fortunes continued to improve albeit at a slightly slower pace in 2007 than a year before, suggesting continued strong momentum and some maturation of the sector, according to a report by Scorpio Partnership, the UK-based wealth management think tank.

The private banking industry chalked up an 11.6 per cent median increase in assets under management when measured in local currency terms—a slightly slower pace from the 13.8 rate achieved in 2006.

Scorpio, in its seventh annual public survey on the sector, said that the geographical focus of asset growth is shifting, with the Asia-Pacific region taking a growing share of the total.

The report comes out on the same day that Merrill Lynch and CapGemini are due to release their annual report on the number of high net worth individuals and ultra HNW individuals around the world. In recent years, the data from such reports has helped demonstrate why wealth management has become one of the hottest parts of the financial system.

“This industry is coming of age and may even be a bright light in gloomy markets. The positive results throw even greater emphasis on the potential of the wealth management sector to provide strong revenue and returns for financial groups seeking to chart a course through the current volatile markets,” said Sebastian Dovey, managing partner at Scorpio.

“However, in our view, the real opportunity for significant asset growth is still to come, with more than $9 trillion of untapped bankable assets among millionaires still not yet even managed in the sector but it will require visionary banks to win this prize,” Mr Dovey said.

The report, known as the Private Banking KPI Benchmark 2008, showed there was a break in the previous close linkage between the growth in wealth managers’ assets under management and the performance of global equity markets, which may prove reassuring given the weak performance by many stock markets since the start of this year.

In the five years up until 2007, asset growth and stock markets moved in lockstep but the world’s wealth managers outperformed the MSCI World Index by 12 per cent in dollar terms in 2007. “The improved ability to outperform the core indices suggests the real value of the private banking industry is now starting to show itself through active asset allocation,” the report said.

The 100-page report covers 211 private banking entities and account for a total of $12.6 trillion of assets. Of the institutions analysed this year, net new money as well as market growth combined with further improvements in operating efficiencies, produced a median ordinary profits growth rate of 19.4 per cent, down from the 24.5 per cent profits growth achieved in 2006.

Looking specifically at assets under management, three banks top $1 trillion in assets while a further 24 institutions now manage over $100 billion in private client funds. All three trillionaires - Switzerland’s UBS and the US banks Citi and Merrill Lynch - belong to integrated banking groups, but two of them recorded disappointing asset growth, below the base currency median of 11.6 per cent, suggesting that they clearly had suffered some impact from the sub-prime fallout. Citi’s strong surge was largely due to an effective acquisition strategy undertaken earlier in 2007.

The top 10 wealth managers, measured by assets under management in dollars (billions) were:

1. UBS 1,896

2. Citi 1,784

3. Merrill Lynch 1,309

4. Credit Suisse 745

5. JP Morgan  545 

6. Morgan Stanley 522

7. HSBC 494

8. Deutsche Bank 286

9. Wachovia 285

10. BNP Paribas 231

As a result of the growing economic muscle of Asia, the region now accounts for 13 per cent of all wealth management assets, almost double its share from 2006, the report said. Europe’s share has also grown by 6 per cent while the US is the largest loser, seeing its share falling by 14 per cent.

“The emerging markets are now powering the results of many of the major global wealth management operators with strong brands and distribution. Although it is notable that local operators, even in more mature markets, are in fact the strong performers in terms of margins,” Mr Dovey said.

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