We can see in our country today the rich becoming richer and these are tycoons who has built their wealth for generations. There are, in fact, tycoons who are still alive today who started from being poor to being one of the wealthiest not only in the country but globally. And yet, in a recent survey, there are also many young entrepreneurs engaged in start-up businesses who also comprised Asia’s richest.
We sometimes wonder how the rich people invest their funds and make their wealth grow, particularly here in Asia? The rich in Asia tend to have family offices which is their investment arm and usually look into private-equity investments and property investments to make their money grow. On the other hand, their Western counterparts are more passive investors, particularly in North America—meaning they are more to invest in funds or pay a wealth manager to manage their funds rather than directly investing in companies and in properties.
Capgemini—a management consultancy firm which releases their Asia-Pacific wealth report in October 2016—shows that Asia rich are less likely to invest in equity markets compared to the rich in the United States and Europe. With $71.4-trillion wealth, Asia-Pacific rich, or high net worth individuals (HNWI), surpass North America for the first time in wealth and number of HNWI globally.
Does this mean that the Asia’s rich are more effective in investing their money? The rich in North America and Europe tend to turn to wealth managers to invest their money. But in a report by Bloomberg dated January 4, 2017, it shows that Asia’s richest are abandoning complacent hedge funds and instead family offices of these rich people are turning to private-equity investments. This is because they are disappointed with mediocre returns and high fees from hedge funds and are now turning more to private equity. Redemptions are already at four-year high and it suffered $1.6-billion withdrawals through November.
Capgemini report also shows that only 30.6 percent of their assets were parked with wealth managers, while the rich outside of Asia allocated an average of 34.5 percent of their assets as shown in a CNBC report dated October 13,2016. The wealth of the rich is likely to triple from 2006-2025 to surpass $100 trillion by 2025 propelled by strong Asia growth.
A study of past growth rates and if it continues shows that Asia Pacific is likely to continue to be a dominant force over the next decade representing two-fifths of the world’s wealth by the rich, more than that of Europe, Latin America, and the Middle East and Africa combined.
Start-up firms in the financial services, tech and health-care sectors dominate the increase in Asia’s wealth versus those running the established ones revealed by the Capergemini report. The millennialist are coming in and are taking over the assets of their parents either because of retirement or because the parents are too old to handle the business. However, most of the Asia’s rich patriarchs are still there continuing to grow their money and we can see that most of their money is, indeed, invested directly rather than through wealth funds or passive investments.
Wang Jianlin, a Chinese businessman, for instance, who is the richest man of Asia, is the founder and chairman of the Dalian Wanda Group, China’s largest real-estate developer, as well as the largest movie-theater operator.
Just take a look at our country’s rich, like the SM Group and the group of Lucio Tan and Gokongwei. All their family offices are into property, retail , airlines, hotels, banking investments and shopping-mall development and investment. Majority of their wealth is invested directly in these private companies rather than, for instance, into hedge funds and other passive investments.
Looking at how these wealthy manage and invest their wealth shows us that they are more of risk-takers than their counterparts outside of Asia.
Some of them have humble beginnings but because of their aggressiveness and their appetite for risk plus good business acumen, they were the people behind making Asia the rich tiger in the world and are expected to continue in the next decade.
They are good examples for us who are trying to make a good investment of whatever little we have.
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Wilma C. Inventor-Miranda is the Managing Partner of Inventor, Miranda & Associates, CPAs and Treasurer of KPS Outsourcing Inc.
The opinions expressed herein are the views of the writer and do not necessarily reflect the views and opinions of these institutions