Global Wealth: The great divide!

According to the ‘Global Wealth Report‘ by UBS, a Swiss bank, 1.5% of the world’s population own 47.5% of assets, while 39.5% of the global adult population only own 0.5%. The wealth pyramid in the report clearly shows what I suppose we all already knew: That a large proportion of global wealth is concentrated in the hands of a small number of people. But how many people belong to which asset classes?

Let’s begin at the bottom of the pyramid: Roughly 1.5 billion adults own less than $10’000 per person or a total of some $2.4 billion. A further 1.6 billion people (42.7% of the global population) own assets (defined as cash, investments, property after deduction of liabilities) of between $10’000 and $100’000 per adult. In total this group’s wealth amounts to $56.5 trillion or 12.6% of global wealth. The upper middle class includes people with assets of between $100’000 and $1 million. This group comprises 613 million adults, or 16.3% of the population. Their combined wealth amounts to $177.2 trillion, which accounts for 39.4% of global wealth. The top 1.5% or 58 million adults with a net fortune in excess of $1 million own a total of $213.8 trillion.

And as the saying goes: It is lonely at the top! Only 14 individuals seem to call fortunes in excess of $100 billion their own, followed by a further 12 with wealth of between $50 and $100 billion. A further 2638 adults own assets worth between $1 and $50 billion.

So how is this wealth geographically distributed? It seems that 37.3% can be found in the Americas, 36.9% in the Asia-Pacific region and ‘only’ 25.8% in Europe, the Middle-East and Africa (EMEA). And looking more closely at the top 1.5%, UBS finds that 38% of them are in the US, 23% in Western Europe excluding the UK (that’s probably Brexit for you, however, still 5% of this group’s wealth is actually in the UK), 13% in ‘Greater China’ (and I really don’t know, whether this includes Taiwan or not), followed by 10% in South-East Asia, 7% in other countries and 5% in Japan. As far as growth is concerned, however, the APAC region leads, followed by the Americas, both with above 100% average growth in wealth per adult since 2008, followed by EMEA with a somewhat lacklustre 41%. Which goes to show that economic growth increasingly is happening outside the ‘old continent’. As far as millionaires are concerned (fortunes between $1 million and $1 billion), 16% of these approximately 58 million people are found in Luxemburg, with a further 15% in Switzerland, followed by Australia and Hong Kong at almost 10%.

Interesting also is the change in distribution of wealth over the past 24 years (UBS track it since the year 2000): Whereas the lowest group (with a wealth of $10’000 or less) now includes just short of 40% of the global adult population, this used to be 72.5% in the year 2000. On the other hand, the upper middle class has grown from just short of 17% in the year 2000 to 42.7% today, while the mega-rich’s representation of the total population has risen from 0.5% to 1.5% over the same period.

Clearly inequality is still rife, but overall and looking at the above figures, maybe not quite as much as a quarter of a century ago. In particular it’s good to see, that the number of people with wealth of at least $10’000 has shot up. Were one to take into consideration differences in costs of living. $10’000 may not seem a lot, but in Africa and some Asian countries adults with this sort of fortune are firmly part of the middle class. In this respect it might be interesting to crunch these same numbers again, but taking into account Purchasing Power Parity (PPP) per continent, region or country.

And wealth is mobile: UBS calculate the chance of upgrading from the lowest wealth bracket at 61.7%, Unfortunately, if like me you find yourself somewhere in the middle class, the odds of rising up the ranking is only about 32%. On the other hand the risk of falling out of the highest bracket is quite considerable at 51.6% with the most likely explanation no doubt being that a major part of these fortunes consists of valuations of the equity stakes in their companies, which, as volatile financial markets have shown repeatedly, can go up or down.

The question which then remains is: Does wealth make happy? But that’s for another blog post….