Ultra-high-net-worth individuals investment strategies could offset slowdown effects

Ultra-high-net-worth individuals investment strategies to offset the effects of the global economic slowdown, political upheaval and negative rates

Asia’s population of ultra-high-net-worth individuals (UHNWIs) – those with a net worth of US$30 million or more – expanding at a rate that outpaces most other world regions last year, according to Knight Frank’s Wealth Report 2020.

In 2019, Asia topped a league table of the world’s fastest growth of UHNWIs, dominating 7 out of the top ten places with an estimated increase of 11,800 UHNWIs – up 13% – bringing the total population in the region to 103,000 individuals. North America, where the largest proportion of world’s wealthiest population reside, registered a 6% increase in UHNWIs last year, while Europe saw its position lag at 4%.

Source: Wealth Report 2020

Despite its smaller population and higher base, Singapore witnessed one of the ten highest growth rates of UHNWIs in the world, from 2018 to 2019. The local growth of UHNWIs came as more UHNWIs were drawn to the Singapore’s liveability, as they set up base in the country for business.

Additionally, UHNWIs are attracted to Singapore’s potential for investment, as well as its lifestyle. According to Knight Frank’s City Wealth Index, Singapore ranked 5^th globally when considering lifestyle factors and 10^th when it came to investments. Notwithstanding, the vibrant start-up scene locally has also given rise to a new wave of UHNWIs.

UHNWI growth from 2019 to 2024

Looking ahead, the growth rate of UHNWIs in South-East Asia is projected to be one of the highest in the world. Out of the top twelve fastest growing UHNWI markets, four come from South-East Asia, with expected growth rates of around 30% or more. One reason for the strong, anticipated growth is the rise of disruptive business models created through technology, and abundant capital. As a gateway city and regional hub, Singapore is primed to benefit from neighbouring growth of UHNWIs as well.

Source: Wealth Report 2020

Ultra-high-net-worth individuals investment strategies nurtures budding start-ups or social enterprises

Ian Loh, Head of Investment and Capital Markets (Land, Building & Collective Sales), Knight Frank Singapore, says, “The projected growth rate of UHNWIs in South-East Asia will increase the number of family offices set up in Singapore, given the attractiveness of the investment schemes available and the robust and transparent legal structure. This is especially so as the government looks towards enhancing Singapore’s competitiveness as a wealth hub.

“Besides investing in new business opportunities to help nurture budding start-ups or social enterprises, these family offices are also likely to seek assets that offer stable yields, such as office properties in the CBD or shophouses.”

The Wealth Report 2020 says ultra-high-net-worth individuals investment strategies may offset the effects of the global economic slowdown

Ultra High Net Worth Individuals (UHNWIs) in Singapore are planning to alter their 2020 investing strategies to offset the effects of the global economic slowdown, political upheaval and negative rates, according to The Wealth Report 2020.

In the Attitudes Survey* of 620 wealth advisors managing approximately US$3.3 trillion on behalf of UHNWIs across the globe, 100% of Singaporean respondents indicated that they were actively making changes to their clients’ investing strategies, outstripping the regional average (72%), and the global average (79%).

The year 2019 was a positive year for Singaporean UHNWIs, with 71% stating their wealth had increased, slightly outstripping the regional and global averages. They appear to be more muted about the year ahead, largely due to global political and economic challenges rather than domestic, with 53% expecting their wealth to increase in 2020.

Singaporean ultra-high-net-worth individuals investment strategies will include homes

The Wealth Report 2020 also reveals that about one in four Singaporean UHNWIs will buy a new home in 2020, outstripping the global average of about one in five. The main drivers for purchases are to upgrade their main residence, for their children’s education, or for business purposes. The most popular locations, other than Singapore, are the UK, Australia and US, wealth mangers say.

Wendy Tang, Group Managing Director, Knight Frank Singapore, shares, “Many HNWIs are attracted to Singapore’s safety, world-class infrastructure and education, stable political environment and pro-business government. Prime residential properties in Singapore have continuously proven to be one of the top asset classes for wealth preservation.

“Additionally, Singapore is the third most popular destination for buying homes amongst Asian investors, behind the traditional markets of US and UK. The country registered a 10% growth rate in UHNWI individuals from 2018 to 2019, ranking eighth among the top 10 countries that saw the highest surge in UHNWI numbers.”

Nicholas Keong, Head, Residential International Project Marketing, Knight Frank Singapore, comments, “Singaporeans have a major love for the UK and in particular, London property. Not only does the capital perfectly embody a “live, work and play” lifestyle that makes it vastly desirable, it is home to some of the best schools and universities in the world that continue to be a big draw for Singaporean families, who are in part are driven by a strong desire to educate their children in London or in the rest of UK.

“With the certainty brought about by December’s general election, the UK leaving the EU on 31 Jan 2020 and a suppressed Sterling Pound, we’re seeing renewed confidence in London property and the UK, from both investors in search of attractive mid-to-long term returns, and parents looking to purchase for their children.”

Where are your UHNWI clients planning a home purchase in 2020?

Source: Wealth Report 2020 Attitudes Survey

Ultra-high-net-worth individuals investment strategies will include allocations to cash and currencies

To preserve or create wealth, 67% of UHNWIs intend to increase their allocations to cash and currencies, followed by private equity (58%). Some 40% of respondents said they would increase allocations to real estate, which already accounts for 40% of current allocations and is currently the most popular asset class among Singaporean UHNWIs, according to the survey.

Almost three quarters of respondents are also looking to increase their philanthropic activities, particularly in the field of climate change (82%), followed by healthcare and education. Additionally, some 90% are seeking to cut their carbon footprint.