BILLIONAIRES: MASTER ARCHITECTS OF GREAT WEALTH AND LASTING LEGACIES

Billionaires Report May 2015 by UBS/PwC

The past 35 years have been a period of extraordinary wealth creation by billionaires. Only the ‘Gilded Age’ at the beginning of the 20th Century bears any comparison. Then fortunes were created from industrial innovation, in sectors such as steel, cars and electricity. Now they are being made from the consumer industry, technology and financial innovation in the US and Europe, as well as consumer products, globalization, industrialization and infrastructure booms in Asia and other emerging markets.

We have looked back over the latter half of what we call a second ‘Gilded Age’ and found that 917 self-made billionaires have created fortunes of more than US$3.6 trillion in this period. Along the way, they have driven the development of the internet and its ecosystems, perhaps the greatest innovation of our time, led Asia's consumer products revolution, and developed Asia's factories, infrastructure and real estate. They have also set up some of the hedge and private equity funds that have revolutionized finance.

Second Gilded Age

The world is in a second ‘Gilded Age’, comparable to the first ‘Gilded Age’ at the beginning of the 20th Century.

The majority of the world’s billionaires have made their wealth in the past 20 years, when they have created more than 
US$3.6 trillion. US entrepreneurs have created most wealth, leading a wave of innovation in technology and finance. Asia’s new industrialists, consumer product tycoons and real estate investors have also participated, seizing opportunity from rapid macro-economic growth, globalization and urbanization. Rising real estate and capital markets have played a strong role in the creation of new billionaires.

Levelling off likely

Contrary to some observers of our time, we believe this second ‘Gilded Age’ is unlikely to go on forever but will level off.

Just as economies grow in cycles, so the opportunities that led to this most recent exceptional period of wealth generation are likely to come to an end. Tax, social equality initiatives, asset price deflation and geopolitical tensions – there are approximately 40 civil wars and armed conflicts raging – will likely have significant consequences for great wealth creation.

Sustainable Legacies

As this generation of self-made billionaires ages, they have to decide what their legacies will be.

Almost two thirds of billionaires are over 60 years old and have to choose how to preserve their achievements and to transfer their wealth effectively either to future family generations, to philanthropic causes or some combination of the two. Without a clear and sensible governance and strategy, wealth can swiftly dilute over generations, through death, divorce and taxes.

Planning and structuring for the long term are critical, and some billionaires are setting up sophisticated structures (i.e. family offices) with the characteristics of private equity to safeguard their legacies. Increasingly, large billionaire families are held together through meticulously drafted charters dealing with critical governance issues.

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