Family fortunes of wealthy increase as superrich ride coronavirus storm
More than three-quarters of the world’s richest people have reported an increase in their already vast family fortunes, despite the economic shock caused by the coronavirus pandemic.
Research into the family offices of the super-rich found that the vast majority were able to “ride out 2020’s storm in financial markets”, while many less wealthy people have lost their jobs and seen the value of their savings and pensions collapse.
The report by the Swiss bank UBS found that 77% of the richest families – who had average fortunes of $1.6bn (£1.25bn) – had seen their investment portfolios “perform in line with, or above, targets during one of the most volatile moments in the history of financial markets”.
Of the 121 family offices included in the survey, 93 had met or exceeded their financial targets in the year to May 2020. They achieved this despite most countries in the world suffering their worst economic contractions in decades. Some 24 of the family offices in the survey managed private fortunes of more than $3bn.
Josef Stadler, head of UBS’s ultrahigh net worth unit, said the world’s richest people had been able to increase their fortunes during the crisis because they had enough money to
“embrace and manage risk like no other investor”.
“They stick to their plans, even when market volatility makes it uncomfortable. They hold their position. They are disciplined,” Stadler said. “It is missing an opportunity that gives these clients the biggest headache, not making a short-term loss.”
The rising fortunes of the superwealthy come as separate research shows that it is the poorest people in society who are mostly likely to be losing their jobs and suffering the biggest percentage fall in income.
“The crisis has so far impacted the earnings of the poorest households the most,” a report by the Institute for Fiscal Studies found last month. “Households in the poorest fifth – as measured by their pre-crisis income – have been hit hardest in terms of earnings, with a fall in their median household earnings of around 15% (or around £160 per month).”
The coronavirus crisis could increase global poverty by as much as half a billion people, or about 8% of the world population, according to research by the United Nations University.
Ana Arendar, head of inequality campaigns at Oxfam, said: “Whilst those with great wealth are able to reallocate their investments to insulate themselves from the economic impacts of Covid-19, most poor people in developing and developed countries cannot take similar action to protect their limited wealth.
“Wealth inequalities were already too high before the crisis and action is needed to ensure the gap does not grow further.”
Family offices – which were pioneered by the Rockerfeller family in the late 19th century to preserve their wealth for future generations – are also used by wealthy people to run homes and staff across the world and to look after private jets, super-yachts and other accoutrements.
The number of super-rich people continues to grow despite the economic impact of the coronavirus crisis. Jeff Bezos, the world’s richest person and the founder of Amazon, has seen his fortune swell by $75bn so far this year to a record $189bn.
More than 500,000 people in the world are classed as “ultra-wealthy”, with fortunes of more than $30m (£26.5m). That means there are more ultra-wealthy people than the populations of Iceland, Malta or Belize.
This week, a group of more than 80 millionaires called on governments permanently to increase taxes on them and other members of the wealthy elite to help pay for the economic recovery from the Covid-19 crisis.