Pan­demic could erase $16 tril­lion of wealth this year, topping ’08 cri­sis

Richmond Times-Dispatch - - BUSINESS - BY MARION HALFTERMEY­ER Bloomberg

The rich are still get­ting richer, but the coro­n­avirus cri­sis may slow the break­neck pace of wealth ac­cu­mu­la­tion for years.

Volatile mar­kets and the eco­nomic fall­out from the virus could wipe out as much as $16 tril­lion of global wealth this year and hin­der growth for the next five years, ac­cord­ing to a study by Bos­ton Con­sult­ing Group. By com­par­i­son, the 2008 fi­nan­cial cri­sis erased $10 tril­lion.

A decade-long bull run in equities has helped the mil­lion­aires and bil­lion­aires of the world in­crease their wealth at double the rate of mid­dle-in­come and poor peo­ple. Now that same de­pen­dence on mar­kets can put their for­tunes at risk if vo­latil­ity caused by the virus con­tin­ues for years.

Per­sonal fi­nan­cial wealth reached $226 tril­lion glob­ally in 2019, a 9.6% gain from 2018 and the strong­est an­nual growth rate since 2005, the BCG study found. But from 2019 through 2024, wealth growth world­wide could slow to a com­pound an­nual growth rate of 1.4% if BCG’s worst-case sce­nario pans out. Its model for a quick re­bound pre­dicts a rate of about 4.5%.

The num­ber of dol­lar mil­lion­aires glob­ally has tripled over the past 20 years to 24 mil­lion — with more than two-thirds in North Amer­ica — and they col­lec­tively now hold more than half of all fi­nan­cial wealth, the re­port said. That means a worst-case sce­nario would hit North Amer­ica hard­est, along with Ja­pan. Both re­gions would ex­pe­ri­ence de­clines over the five-year pe­riod.

BCG es­ti­mates that

$9.6 tril­lion of the world’s wealth was held off­shore in 2019, up 6.4% from the pre­vi­ous year, with Asia (ex­clud­ing Ja­pan) be­ing the largest con­trib­u­tor.

In the short term, the wealthy will move as­sets to per­ceived havens. While Switzer­land re­mains the des­ti­na­tion of choice for those want­ing to place money abroad, Hong

Kong and Sin­ga­pore are catch­ing up. Both are ex­pected to grow the as­sets they man­age more than twice as fast as Switzer­land over the next five years.

The pan­demic could also push change for the guardians of the world’s riches. Wealth man­agers are con­fronting the virus in worse shape than they were be­fore the fi­nan­cial cri­sis, with lower re­turns on as­sets and higher cost bases than in 2007, ac­cord­ing to BCG.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.