Are billionaires feeling the pressure?

UBS / PwC Billionaires Report 2016

Welcome to the third edition of the UBS/PwC Billionaires Report. Following our first comprehensive reports on billionaire wealth in 2015, we continue our investigation into this historic era of wealth generation. This year we have analyzed data covering 1,397 billionaires looking back over two decades. Our database includes 14 of the largest billionaire markets, which account for around 80% of global billionaire wealth. Further, we’ve conducted over 20 interviews with billionaire advisors and further face-to-face interviews with more than 30 billionaires and approximately 30 of their heirs. UBS and PwC advise a large number of the world’s wealthy and have unique insights into their changing fortunes and needs.

 

US BILLIONAIRE GROWTH FALTERS

With the world’s largest billionaire population, the US sets the pace. Great wealth creation continues in the US, but it is slowing. The country’s billionaire population grew by just five in 2015, to 538. Yet their total wealth fell by 6% – from USD 2.6trn to USD 2.4trn. While US self-made billionaires have driven this Gilded Age, and the US hosts almost half (47%) of billionaire wealth, the world’s leading billionaire economy has lost some of its momentum.

 

THE SECOND GILDED AGE PAUSES

After more than 20 years of great wealth creation, the Second Gilded Age has hesitated. The transfer of assets within families, commodity price deflation and an appreciating US dollar have emerged as significant headwinds. In 2015, 210 fortunes broke through the billion-dollar wealth ceiling, increasing the billionaire population in the markets we cover (14 of the largest billionaire markets) to 1,397. Yet their total wealth fell from USD 5.4trn to USD 5.1trn. Average wealth fell from USD 4bn in 2014 to USD 3.7bn in 2015. It is too early to tell if 2015 signals a pause in the Gilded Age or something more.

 

HUGE WEALTH TRANSFER IN SIGHT

The past 20 years’ exceptional wealth creation will soon be followed by the biggest-ever wealth transfer. We estimate that fewer than 500 people (460 of the billionaires in the markets we cover) will hand over USD 2.1trn, equivalent to India’s GDP, to their heirs in the next 20 years. For most of Asia’s young economies, this will be the first-ever handover of billionaire wealth, as over 85% are first generation.

 

OUTLOOK

The Second Gilded Age has paused. Wealth transfer and commodity price deflation are putting billionaires under pressure at a time when technology and finance, the motors of great wealth creation, have stalled. This is chiefly a US phenomenon, but even in Asia billionaire wealth has stopped growing. The notable exception to this trend is China, where billionaires continue to thrive. 2015’s data alone does not set a trend. We expect financial asset performance and economic growth to create a favourable environment for billionaire wealth creation in 2016 and 2017. For financial investors, global equity and credit markets are expected to deliver positive returns. For entrepreneurs and portfolio investors, UBS forecasts the global economy will grow 5.6% (in nominal terms) in 2016 and a further 6.1% in 2017. Finally, over 80% of the entrepreneurs in our UBS Industry Leader Network have consistently reported stable or improving business outlooks in 2016.

 

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