Four Trends Hovering Over the Market: Geopolitics and Economic Transformation, Sustainability, Technology, and Demographics

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Amundi Shares Key Insights from the 2024 Edition of its Global Forum, Amundi World Investment Forum. The event featured in-depth discussions on geopolitical issues, economic transformation, major global macroeconomic trends, and their implications for investment.

In her opening speech, Valérie Baudson, CEO of Amundi, shared her convictions about the state of the world: “The economic outlook is improving, with global GDP growth around 3% in 2024 and 2025. Meanwhile, history and geopolitics are back in focus, with energy transition and technological innovations at the center of geopolitical tensions, as they condition nations’ ability to maintain or gain power.”

The firm shared several key conclusions. The first is that major political and economic changes threaten long-standing trade and security alliances. According to the firm’s perspective, global politics affecting economies was a prominent theme among the speakers. Sanna Marin, Prime Minister of Finland (2019-2023), focused her talk on the current conflict in Europe, stating, “A major game is being played between democracies and authoritarian regimes. What is happening in Ukraine will define the future of democracy.” She urged Europe and NATO to offer “broader perspectives” and reminded that “geopolitics is not the only threat facing humanity; climate change and biodiversity loss are also critical.”

Adam S. Posen, President of the Peterson Institute for International Economics, predicted, “Markets will push interest rates up in the coming years.” Ricardo Reis, A.W. Phillips Professor of Economics at the London School of Economics, explained public debt movements by three factors: “The large current account deficits of China and the rest of Asia caused a significant capital flow into Europe and the United States, investment stagnation due to very few opportunities in the 2010s, and the perception of government bonds as very safe with little inflation risk. Today, all three factors have reversed.”

Additionally, Keyu Jin, Professor of Economics at the London School of Economics, estimated that “the three fastest-growing economies in the coming years will be in Asia: China, India, and Indonesia,” and spoke about “the need for convergence” in the region: “China has room to converge with richer countries, and India also has enormous room to converge with China.”

Gordon Brown, Prime Minister of the United Kingdom (2007-2010) and Chancellor of the Exchequer (1997-2007), concluded the first day of debates with a message of hope, stating, “Even in the most difficult circumstances, even when things are very dark, we must keep hope alive. There are still signs of hope in this global economy that we must build upon, as Mandela said, ‘building for the future.’”

Sustainability, Technology, and Demography

The decarbonization of economies was a major focus. Dinesh Kumar Khara, Chairman of the State Bank of India, highlighted the “immense” potential of his country: “We are now embarking on green energy, which is being adopted significantly.”

Two case studies were presented: Chee Hao Lam, Chief Representative of the Monetary Authority of Singapore at the London Office, discussed how Singapore articulates public policy and mobilizes investors to finance the energy transition. Dr. Kevin K. Kariuki, Vice President of Power, Climate, and Green Growth at the African Development Bank Group, spoke about financing green energy infrastructure in a continent that “needs $25 billion annually to achieve universal access to modern energy by 2030.”

The firm also reflected on how the rapid acceleration of technological development has created new opportunities and pressures. Maurice Levy, Chairman Emeritus of Publicis Group, opened the second day’s debate with a focus on the rise of generative artificial intelligence. In his view, “On one hand, people think AI is probably the dream of tomorrow, which will change lives, especially for companies, their productivity, and profitability. At the same time, there is fear of job cuts and replacement, but most importantly, we need to address the implications regarding the use of deepfakes in democracy.”

Daron Acemoğlu, Professor at the MIT Institute, stated, “The key decision for CEOs will be how to use AI with workers, with human resources: whether they see workers as a cost to be cut or as an important resource that will contribute to their company’s success.” Aurélie Jean, Ph.D. and Computational Scientist, entrepreneur, and author, complemented this statement: “AI does not sufficiently protect workers. Technology owners, developers, scientists, and engineers have a responsibility to provide users with the correct information; they must protect while also fostering innovation.”

Experts remind us that financial services are at the heart of the AI revolution. “There is a huge opportunity to turn European savers into future European investors, and if AI can help with that, it will contribute to a better society,” said Dr. Kay Swinburne, Baroness of Swinburne.

Finally, the firm believes that demographic change is influencing many aspects of our lives. Mauro Guillén, Professor of Management and Vice Dean at the Wharton School, stated, “The key question is how to ride the wave of demographic transformations. India will soon have the largest consumer market in the world due to its younger population, although China will have the largest economy.” Demographics will impact investment trends, as “most of the world’s wealth, between 60% and 80% depending on the country, belongs to people over 60 years old.” Hence the need for “investment platforms to be safe, educational about risks and opportunities, and accessible” for all.

A Strengthened Trump Could Translate Into Higher Demand for Safe-Haven Assets and More Risks in the Markets

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The failed assassination attempt on Donald Trump this weekend during a rally in Pennsylvania brings a new direction to the US presidential race, improving his chances of victory. Additionally, according to experts, this event, which has dominated headlines since Saturday, could lead investors to seek safe-haven assets such as the dollar, gold, the Swiss franc, government bonds, and high-quality stocks.

In the opinion of Christian Gattiker, Chief Analyst at Julius Baer, regarding the political impact, Donald Trump’s election chances have increased dramatically. “If successful, this would mean a shift towards a more risk-taking mode in the markets, with higher expected growth in 2025 due to lower taxes and business-friendly policies,” he points out.

The experts at Renta 4 Banco share a similar assessment in their daily morning report: “The assassination attempt on Donald Trump this weekend could strengthen his chances of victory in the November presidential elections, as well as further increase political tension in the US.”

Bloomberg adds that it not only strengthens Trump’s position but also opens a new front for his opponent. “US President Joe Biden now finds himself fighting a re-election battle on two fronts: against Donald Trump and, more immediately, against some skeptics in his own party.” In this regard, Biden insisted to the press during Thursday’s press conference following the NATO meeting in Washington that “I am determined to run, but I think it’s important to allay fears.”

So far, around 20 Democratic House members and one Democratic senator, Peter Welch of Vermont, have publicly called for Biden to withdraw from the race against 78-year-old Trump, according to Bloomberg’s count.

Regarding the market, the Chief Analyst at Julius Baer believes that “it is quite possible that safe havens such as the US dollar, gold, the Swiss franc, seemingly safe government bonds, and high-quality stocks will be sought in the short term.” However, Gattiker clarifies: “If we believe the well-informed experts on US politics, the realization that Donald Trump’s election chances, and those of the Republicans in general, have significantly improved could settle in quickly, possibly even during the Republican National Convention this week. It is quite possible that we will see an iconic image of a raised fist against a bright blue sky as a defining moment of this campaign and beyond, which could be seen as a decisive moment in the election. This, in turn, would mean a shift towards a more risk-taking mode in the markets, with higher expected growth in 2025 due to lower taxes in the US and more business-friendly policies. How quickly this turnaround can occur largely depends on how quickly and successfully the Republicans can turn this shock into political capital,” he argues.

Inflation Data for June in the US: Is It the Clear Signal the Fed Was Waiting for to Lower Rates?

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Markets and investors are confident that the US Federal Reserve (Fed) will announce a first rate cut in September. The argument supporting this conviction is the positive inflation data for June in the US: the year-over-year headline indicator showed an increase of 3%, lower than the expected 3.1% and down from 3.3% the previous month; and the core CPI surprised with a cut of one-tenth from the previous figure, reaching its lowest level since April 2021.

“On a monthly basis, the headline rate turned negative for the first time in nearly four years, with a -0.1% versus the expected 0.1% and the flat variation of the previous month. Overall, this confirms the trajectory towards the 2% target, although fluctuations may occur in the coming months,” explain analysts at Banca March.

By components, Banca March notes that both services and goods contributed less to inflation. “For services excluding energy, the variation was only 5%, the lowest rate since April 2022, contributing 3% compared to 3.11% the previous month. This was mainly due to a significant slowdown in attributed rents: 5.4% in June, the lowest growth since May 2022, compared to 5.6% previously, contributing 1.4%. As for goods prices, they declined at a rate of 1.84%, the biggest drop in 20 years, thus subtracting 0.40% from inflation. Finally, there was also a sharp slowdown in energy, growing by 0.99% compared to 3.67%, contributing only 0.08% versus 0.26%,” they detail in their daily analysis.

According to Banca March, it is undeniable that this is a good data point, reflected in market behavior. “It boosted bond prices on both sides of the Atlantic, leaving 10-year rates in the United States at their lowest levels since late March, and in Germany, the 2.5% level was breached again. Additionally, interest rate futures raise the chances of cuts in September to 90%, making it practically certain,” they add.

September: Rate Cut

In light of this macroeconomic data, combined with the outlook on the labor market and the US economy presented by Fed Chairman Jerome Powell this week during his testimony before the Senate Banking Committee, the first rate cut in the US is set for September. According to Ronald Temple, Chief Market Strategist at Lazard, at this point, a rate cut in September should be a “done deal.” “In the second quarter, the overall inflation rate in the US was 1.1%, with core inflation at 2.1%, making it increasingly evident that the upward surprises in the first quarter were anomalies. Given the growing evidence of slowing economic growth, it is time for the Federal Reserve to refocus on the dual mandate and ease monetary policy,” Temple argues.

For John Kerschner, Head of US Securitized Products and Portfolio Manager at Janus Henderson, both the headline and core CPI were weaker than expected, giving the Federal Reserve the unequivocal signal that it will start lowering rates by the end of the year. “With less than three weeks until the next Fed meeting, the market is currently pricing in that it will skip that meeting and make its first cut in September. The probability of a cut at that meeting is now close to 100%, according to the market. More importantly, the market now expects three cuts by the end of January 2025. Chairman Powell recently said that inflation risks are now more ‘balanced.’ Yesterday’s figure reinforces that view and may now tilt the balance toward concern over a sharper slowdown in the US economy,” Kerschner states.

There is a clear consensus that weaker US inflation data strengthens the case for a rate cut at the September Federal Open Market Committee meeting. “Along with softer economic data, including a cooling labor market, this has increased confidence that inflation will tend to decline in the coming months. We lower our US inflation forecast to 3% in 2024 and 2.2% in 2025. We still expect the Federal Reserve to cut rates in September and December 2024,” acknowledges David Kohl, Chief Economist at Julius Baer.

According to Kohl, the decline in inflation in June follows a moderation in May and reinforces the view that the Fed will cut the federal funds rate target at its September meeting. “Weaker economic data, including a cooling labor market, also increases our confidence that inflation will decelerate further in the coming months and that the Federal Reserve will cut the target rate again at its December meeting. We lower our annual inflation forecasts for 2024 from 3.2% to 3.0% and for 2025 from 2.3% to 2.2%,” he concludes.

However, there are also dissenting voices in the industry. According to experts at Vanguard, despite the turn taken by the unexpected strength of the US economy, the events of the first half of 2024 have reinforced their view that the environment of higher interest rates is here to stay. “The current economic cycle is not normal. The global economy is still settling after unprecedented economic shocks that include a pandemic, a war in Ukraine, and rising geopolitical tensions. Structural changes, such as an aging population and rising fiscal debt, also make it difficult to decipher the economic cycle from the trend. This creates a challenging environment for central banks, markets, and investors,” says Jumana Saleheen, Chief Economist for Europe at Vanguard.

From Slogan to Numbers

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This week marks the beginning of the Q2 earnings reporting season in the U.S.

Approximately 42% of S&P 500 companies (213 in total) will report their performance by the end of the month. As usual, banks will be the first to report and are expected to detract the most from overall financial sector earnings growth (-10%), whereas excluding banks, the aggregate earnings per share (EPS) for insurance companies, capital markets, and other financial services firms would increase by ~15% (compared to the 4.3% estimated by consensus for the industry).

At first glance, the performance of banks (BAC, C, WFC, JPM) will likely be similar to the previous quarter. The yield curve remains inverted, long-term bond yields have increased by 0.17% during the period (compared to a 0.3% rise in the first three months of the year), loan growth continues to moderate, and while net interest income will also maintain a moderate growth rate, management teams might provide positive comments regarding a bottoming out of the margin. More clarity on the news reported by Reuters about comments on Basel III “Endgame” capital rules by the Fed would boost the share prices of major banks.

Broadening the perspective, according to S&P data, the consensus among analysts expects S&P 500 EPS to grow by 5.74% for the April-June quarter compared to the same quarter last year. Strategists and managers are betting on a positive EPS surprise below the average of recent quarters, placing this growth in the 7% – 8% range. The twenty companies that have pre-announced have reported ~+4% above consensus, justifying this bet.

The numbers are heavily skewed towards the contribution of the technology and communication services sectors. Earnings for Microsoft, Amazon, Apple, Meta, Nvidia, and Alphabet are expected to grow by 32%, while non-tech industries will only grow by ~2%. This starting point increases uncertainty regarding the outcome of the quarterly performance announcements because, on one hand, the EPS growth of these tech companies is slowing down (from 68% in Q4 2023 to 56% in Q1 this year). On the other hand, margins are unlikely to improve much further.

The consensus projects operating margins of 12.5% for the S&P (an increase of 5.3% from last year, still below the 2021 peak of 13.54%), with a 30.87% contribution from technology and communication services.

Therefore, it is important to pay attention to the comments from the management teams of hyperscalers regarding their plans to deploy around $200 billion in capital investments, with a significant portion associated with generative AI developments announced last quarter.

Everything has its limits, and while generative AI remains a priority for tech companies from an investment perspective, monetary commitments of this magnitude could negatively impact return on invested capital (ROIC) if not adequately monetized, and this is not simple or quick to achieve.

Nvidia’s cadence in launching new products helps build an AI offering more efficiently in the medium term, although in the short term, the price to pay starts to concern investors.

Blackwell, Nvidia’s new GPU chip, which will be marketed around 2025 and installed in the AI server GB200 NVL72, provides up to 30 times more performance than a rack configured using the same number (74) of Hopper GPUs (H100, the model preceding Blackwell) for large language model inference, while reducing energy consumption per computing unit (FLOP). The new system is also four times faster in training AI models than the previous version. However, these impressive improvements are not cheap. The price of two 16 GPU H100 systems is $400,000, and according to some analysts, the GB200 NVL72 could cost $3.8 million.

Nvidia is undoubtedly the clear winner in the AI leadership race, as demonstrated by its numbers. Analysts estimate more than $200 billion in revenues for the data center business by 2025, which generated $48 billion in 2023, translating to a compound annual growth rate of 63%. However, according to a Morgan Stanley survey of Chief Information Officers, AI investment momentum is slowing, and passing on such significant price increases to customers, despite efficiency improvements, may become more challenging.

Experts in the field expect continued spending on increasingly costly and complex large language models (LLM) development, which could cost between $10 billion and $100 billion by 2027, according to the CEO of Anthropic in this interview. And investors have no reason to doubt.

If Microsoft, Alphabet, Meta, or Amazon suggest slowing their investments or taking a more patient approach, these same investors might start to waver.

As explained earlier, the good performance and maintenance of guidance by tech companies are necessary for analysts to maintain their aggressive earnings growth targets, averaging 12.85% per quarter for the next five quarters. This is possible but increasingly challenging if, as mentioned last week, the recovery in industrial activity begins to cool.

Arguments in favor of a first rate cut in the U.S. in September are mounting after Thursday’s CPI and Jerome Powell’s comments: the Fed chair stated in his testimony this week that inflation “is not the only risk we face.” However, while the compression in public debt yields benefits the valuation of growth companies like software or semis, managers seem too focused on the return of disinflation but not enough on the slowing growth – which is becoming increasingly evident – and the volatility that the presidential campaign will bring starting in September.

Biden’s intervention at the NATO meeting was much more solid than his debate with Trump, and his intention is to run for re-election, although there are increasing domestic (both political and non-political) and international pressures for him to step down.

The aggregate polling provided by RealClearPolitics gives Donald Trump a 47.2% voting intention compared to 44.2% for Joe Biden. Although isolated polls like ABC News (46-46) or Reuters/Ipsos (40-40) show a more uncertain situation, Trump still has the electoral college count on his side, even if he loses the popular vote. Of the 10 states that could tip the balance – with results within 5 points – he would emerge victorious in 7 of them.

Jensen Huang, CEO of Nvidia, said at his developer conference in California that, despite the rising cost of their GPUs, “the more you buy, the more you save.”

The math is correct, but investor sentiment’s volatility and a less dynamic economic activity could suddenly shift investors’ focus from the slogan to the numbers.

Five Charts Explaining Investment Opportunities in European Private Credit

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The 99% of European companies have revenues below €10 million. Among large companies (those with revenues over €100 million), 96% are not publicly traded. According to Aramide Ogunlana, Head of Private Credit Investments at M&G, there is “a clear imbalance in funding sources,” providing additional data: only 4% of companies turn to private markets for financing, compared to 52% that issue bonds and 44% that are publicly traded. Ogunlana delivered a workshop during the recent European Media Day organized by M&G Investments in London.

Private markets have become a cornerstone of M&G Investments’ growth strategy in recent years. The firm is developing new vehicles to make these investments accessible to a broader range of investors. M&G has been investing in private credit since 1997, and its investment portfolio includes both liquid and illiquid corporate debt assets, amounting to €15 billion in private corporate credit and €35 billion in private debt as a broader asset class, including various strategies such as structured credit and real estate debt.

Ogunlana emphasizes the crucial importance of having a long investment history in these markets, as they are heavily relationship-driven: “Maintaining contact is very important, especially when aiming for the most illiquid parts of the market and acting as a sole lender. It’s also important to build relationships in the market to reach the companies you want to enter.” She also highlights the importance of having sufficient analytical capacity in-house to develop proprietary ratings. At M&G, the rating assignment process is conducted independently from the managers’ activities to ensure a neutral perspective. The firm focuses on segments rated B and BB and typically deals with over 200 liquid private companies and between 40 and 60 illiquid private companies.

Why Now?

According to Ogunlana, now is a particularly exciting time to delve into investment opportunities in the private debt market, noting the downward trend in the number of IPOs—the current levels are half of those recorded in the previous 20 years—along with the increase in delistings by companies wanting to return to private status to work more closely and flexibly with their funding sources (see chart).

The investment head notes that the potential is high, given that currently, 70% of European companies still finance themselves via traditional bank loans, compared to 22% of US companies. “This opportunity stands out particularly in Europe, although the global trend still points to high bank intermediation,” the expert notes. She adds that, historically, the European private credit market has outperformed the US in terms of returns (see chart).

As a result, the firm notes that new capital structures have emerged in recent years, and they also anticipate an increase in capital allocations to these market segments. Specifically, based on a survey conducted by Preqin in November 2023, they expect a 51% increase in private debt allocations (up from the current 9%), followed by a 32% increase in infrastructure and a 28% increase in private equity. The only category expected to see a reduction in allocations is hedge funds, which would drop from the current 23% to 19% (see chart).

According to similar data from a Cerulli study, the preferred vehicle for accessing these assets in the wholesale channel is ELTIFs and semi-liquid open-ended funds (37% and 36%, respectively), while co-investment is the least demanded option, with 12% of responses.

Misconceptions

Ogunlana also addressed a second set of perceptions that do not align with the reality of the size, liquidity, and returns currently offered by European markets. For example, she explained that, contrary to the perception that the high yield market is larger and more liquid than other private market segments, the reality in Europe is different (see chart).

Ogunlana demonstrates that the leveraged loan and floating rate note (FRN) market is worth €470 billion, compared to €350 billion for European high yield. “Seniority is very important for investing in these markets; we focus on finding the highest quality assets, at the top of the capital structure, and are very selective in our credit analysis because interest rates are still very high, so we need to calculate the principal recovery well,” she clarifies. She indicates that the recovery rate for syndicated loans is 73%, compared to 67% for senior secured debt.

The most illiquid part of the market is direct lending, with a size of €220 billion. This market is frequented by smaller companies (with EBITDA between €5 million and €75 million) and often each company has only one or very few financiers. It’s a market where “there is no room for error; we need a lot of investment analysis, and therefore our stance is very conservative,” the expert points out.

As a result of all these observations, the expert advocates for a review of the 60/40 model portfolio, noting that private credit offers diversification and decorrelation benefits compared to public markets. For example, Ogunlana states that direct lending behaves “almost like cash,” especially compared to high yield. Additionally, these assets offer a premium for complexity and illiquidity compared to other assets. For all these reasons, it would make sense for private markets to be considered not only as a distinct asset class when designing portfolios but also as part of the mix in more conventional fixed income and equity allocations (see chart).

The Return of Wealth Growth to 4.2% Offsets the 2022 Slump

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The global wealth growth rebounded in 2023 from the 3% contraction experienced the previous year, largely attributed to the monetary impact of the strong dollar. According to the latest UBS Global Wealth Report, wealth increased by 4.2% in 2023, making up for the losses of 2022 in both U.S. dollars and local currencies. This recovery was driven by growth in Europe, the Middle East, and Africa (EMEA), which saw a 4.8% increase, and the Asia-Pacific (APAC) region, which grew by 4.4%. With inflation slowing down, real growth outpaced nominal growth in 2023, with inflation-adjusted global wealth rising by nearly 8.4%.

The report highlights that wealth growth continues progressively worldwide, though at varying speeds. Since 2008, the proportion of individuals with the lowest wealth levels has decreased, while those with higher wealth levels have increased. The percentage of adults with wealth below $10,000 nearly halved from 2000 to 2023, with most moving up to the broader $10,000 to $100,000 range, which more than doubled. It is now three times more likely for wealth to exceed one million dollars.

On the other hand, the report explains that while inequality has been increasing over the years in rapidly growing markets, it has decreased in several mature developed economies. Globally, the number of adults in the lowest wealth bracket is experiencing a steady decline, while all other wealth brackets are consistently expanding.

Regional Wealth Insights

As the report indicates, this wealth recovery is driven by Europe, the Middle East, and Africa. According to the document, notably, while the global wealth decline in 2022 was mainly caused by the strength of the US dollar, last year wealth recovered above 2021 levels, even when measured in local currencies.

It is highlighted that since 2008, wealth has grown faster in the Asia-Pacific region, apparently driven by debt. “In this region, wealth has grown the most – nearly 177% – since we published our first Global Wealth Report fifteen years ago. The Americas are in second place, with nearly 146%, while EMEA lags far behind with just 44%. The exceptional growth in Asia-Pacific wealth, both financial and non-financial, has notably been accompanied by a significant increase in debt. Total debt in this region has grown more than 192% since 2008 – more than twenty times that in EMEA and more than four times that in the Americas,” they note.

In the case of the United States, it remains one of the few markets where wealth growth has accelerated since 2010 compared to the previous decade. In the US, as well as in the UK, wealth has grown uniformly across all wealth categories. “Our analysis shows that wealth inequality has slightly decreased in the US since 2008; in 2023, it housed the largest number of US dollar millionaires,” they add.

Regarding Latin America, growth was strong, but inequality remains present. Specifically, average wealth per adult in Brazil has grown by more than 375% since the 2008 financial crisis, when measured in local currency. This is more than double the growth of Mexico, at just over 150%, and more than mainland China’s 366%. However, Brazil has the third highest rate of wealth inequality in our sample of 56 countries, behind Russia and South Africa.

Finally, EMEA enjoys the highest wealth per adult in US dollar terms, with just over $166,000, followed by APAC, with just over $156,000, and the Americas, with $146,000. “Growth in average wealth per adult since 2008, expressed in dollars, shows a different picture: EMEA ranks last with 41%, compared to 110% in the Americas and 122% in APAC,” they explain.

Wealth Transfer and Horizontal Mobility

One of the key trends highlighted in the report is that wealth mobility is more likely to be upward than downward. “Our analysis of household wealth over the past 30 years shows that a substantial portion of people in our sample markets move between wealth brackets throughout their lives. In every wealth band and over any time horizon, people are consistently more likely to move up the wealth scale than down. In fact, our analysis shows that approximately one in three people move to a higher wealth band over the course of a decade. And, although extreme moves up and down the scale are uncommon, they are not unknown. Even leaps from the bottom to the top are a reality for a portion of the population. However, the likelihood of becoming wealthier tends to decrease over time. Our analysis shows that the longer it takes adults to appreciably gain wealth, the slower their increase tends to be in future years,” the report states.

In this regard, UBS has detected that “a large horizontal wealth transfer is underway.” According to the document, in many couples, one spouse is younger than the other, and generally, women outlive men by just over four years on average, regardless of the average life expectancy of a given region. This means that intra-generational inheritance often occurs before inter-generational wealth transfer.

“As our analysis shows, the inheriting spouse can be expected to retain this wealth for an average of four years before passing it to the next generation. Our analysis also shows that $83.5 trillion of wealth will be transferred in the next 20-25 years. We estimate that $9 trillion of this amount will be transferred horizontally between spouses, mostly in the Americas. More than 10% of the total $83.5 trillion is likely to be transferred to the next generation by women,” the report concludes.

Millionaires

Another relevant conclusion is that the number of millionaires is set to continue growing. In 2023, millionaires already represented 1.5% of the adult population analyzed by UBS. Specifically, the United States had the highest number, with nearly 22 million people (or 38% of the total), while mainland China was in second place with just over six million, roughly double the number in the United Kingdom, which ranked third.

“By 2028, the number of adults with wealth of more than one million dollars will have increased in 52 of the 56 markets in our sample, according to our estimates. In at least one market, Taiwan, this increase could reach 50%. Two notable exceptions are expected: the United Kingdom and the Netherlands,” the report concludes.

Private Markets: An Accessible Promise of Profitability and Diversification for Private Banking Portfolios

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Private markets are one of the fastest-growing assets in recent times, driven by a complex environment in traditional markets, regulation allowing greater access for retail and private banking investors, and increasing financial education, which still requires significant focus. Investment opportunities are attractive in niches like private equity, and especially now in private debt, infrastructure, or real estate. This was a major topic of discussion among asset management, wealth management, and financial services firms at the IMPower Incorporating Fund Forum held in Monte Carlo, Monaco, last week.

Experts agreed on the growth potential offered by the so-called “democratization” of these markets, which have traditionally been exclusive to institutional investors and are now more accessible to wealth and retail channels through regulatory changes, innovations, and technology, as well as new vehicles like ELTIFs or semi-liquid structures.

Institutional investors have benefited from these opportunities for many years, even as public markets have declined and been battered by geopolitical volatility, argued Markus Egloff, MD, Head of KKR Global Wealth Solutions at KKR: “Many institutions have recognized the potential of these assets for years and have increased their allocations. Now, for the first time, thanks to innovation, these markets are more accessible,” he indicated.

“Retail clients deserve the right to invest in private markets as a way to generate consistent long-term results, just as institutional clients have done for many years,” added José Cosio, Managing Director, Head of Intermediary – Global ex US at Neuberger Berman. “It’s an effective way to diversify a portfolio without diluting long-term investment results, and choosing the right manager can really make a difference.”

Diversification, Volatility Management, and Profitability

These markets offer great opportunities for “new” investors in terms of returns, stability, and portfolio diversification: “It is critical to move beyond the traditional 60/40 portfolio to give clients access to value creation,” argued Marco Bizzozero, Head of International & Member of the Executive Committee at iCapital.

For Jan Marc Fergg, Global Head of ESG & Managed Solutions at HSBC Private Bank, the principle of diversification is at the “core” of investment, and it is necessary to move beyond equities and fixed income to add a broader set of opportunities to portfolios that contribute to profitability. “Private markets help in terms of diversification to manage volatility, more so than a traditional 60/40 proposal.”

Similarly, Romina Smith, Senior MD, Head of Continental Europe at Nuveen, explained the importance of going beyond these proposals: “Adding private markets leads to positive solutions, higher returns, and a more stable portfolio. The narrative needs to shift towards having a fixed allocation to private markets.”

“The public markets are undergoing a change: there is a lot of concentration in sources of return and the universe of listed companies is decreasing, a trend that will continue as the incentives for it are diminishing. The value proposition for private markets is on the table,” added Nicolo Foscari, CAIA-CIO, Global Head of Multi Asset Wealth Solutions at Amundi. He further stated: “There is an important change to consider: private markets should not represent a marginal allocation in asset allocation, but rather start thinking of it all together as a whole, like a mosaic, and conduct a top-down and risk concentration analysis in tandem.”

“90% of returns in the public equity markets, such as the S&P500, come from 10 stocks, so the concentration risk is very real, and in fixed income, there is more illiquidity than recognized,” added Stephanie Drescher, Partner, CPS and Global Head of Wealth Management at Apollo. In her opinion, “we have reached a critical point where the industry recognizes that the perception of public markets being safe and private markets being risky is changing. Both simultaneously entail risks and are safe, and it all depends on selection and their complementarity in portfolios, which requires education. There should be a healthier dialogue about this topic.”

The Importance of Education and More Flexible Structures

In this regard, Bizzozero agreed that there is an inflection point around this perception between public and private markets and highlighted the value of financial education to bridge the gap between different investors. George Szemere, Head of Alternatives EMEA Wealth Management at Franklin Templeton, also emphasized education to bridge the investor gap on both sides of the Atlantic: “We must recognize that we are in the early stages of adopting private markets, especially in Europe compared to the U.S. (…) As diversification, liquidity management, etc., goals are achieved and understood, alternative investments will increase. Education is key to this.”

Because “it is an asset not suitable for everyone and must be understood. Democratization is underway but requires a lot of education,” stressed Egloff, warning of the existence of some less scalable strategies that are not as easy to access outside the institutional world.

Precisely to allow greater access to private markets, several structures have been proposed in recent years, from ELTIFs to pure illiquid funds or semi-liquid funds (open-ended or evergreen). Jan Marc Fergg of HSBC Private Bank made clear the coexistence of different structures, more or less liquid, to respond to the demand of different investors: “Open-ended structures also allow for diversifying portfolios and facilitating exposure to private markets; open and closed structures are there for clients and will complement each other,” he argued.

Pablo Martín Pascual, Head of Quality Funds at BBVA, also argued for incorporating private markets into clients’ portfolios via semi-liquid funds, ELTIF 2.0, or Spanish semi-liquid funds. But with a warning: “Semi-liquid funds are the elephant in the room. As an industry, we must be responsible to avoid past disasters – like those in Spain with evergreen real estate funds in 2008 – and it is therefore crucial to perform good selection and due diligence, choose the most prudent funds, and educate private banking.”

Business and Technology

Beyond the benefits for investors, Romina Smith (Nuveen) focused on the opportunities this opening presents for asset managers: “Institutional investors have been leading the demand for private markets, while private banks have been underexposed; but greater product availability and increased education are opening up the space for these latter investors, which means more opportunities for the industry.”

Many also agreed that technology could play a key role in bringing private markets closer to the wealth and retail worlds and in making investment more efficient. “The way wealth investors interact with managers is different from how institutional investors do. Technology simplifies and makes the interaction between LPs (limited partners) and GPs (general partners) more efficient,” added Szemere.

“The demand is still far off: we have a long way to go, although there is a lot of innovation that will make this journey much easier,” said Drescher.

Opportunities on the Table

At the event, experts spoke in various roundtables and conferences about opportunities in private assets, including private equity, private debt, real estate, and infrastructure. They debated the percentage these should occupy in portfolios, always depending on the investor’s profile. From Amundi, they highlighted the importance of looking not only at the percentage but also at what lies beneath, as it’s not the same to invest in assets aimed at generating “income,” like private debt, as it is to invest in capital, like private equity: “Both considerations should go hand in hand: a macro analysis must be conducted, but also look very carefully at what’s beneath,” said Foscari.

Egloff from KKR reminded attendees of the benefits of private equity, but emphasized the importance of selection: “Private equity has outperformed public markets over the past 25 years, especially in times of stress, among other things because allocating capital long-term offers better entry points. But not all managers can weather the storms: in the U.S., there are more private equity managers than McDonald’s branches,” he compared.

While it always depends on the risk profile, HSBC mentioned opportunities in Real Estate and Infrastructure, as they offer stable incomes tied to inflation and infrastructure is linked to key themes such as digitization or data centers, according to Fergg.

For Romina Smith from Nuveen, there are opportunities in private equity, always with the premise of selecting a good manager. Other two attractive segments are real estate, which offers good diversification, high returns compared to other assets and can benefit from macroeconomic stabilization and increased demand, and real assets, such as agriculture and forestry, which offer inflation hedging and are strong diversifiers.

Thomas Friedberger, Deputy CEO & Co-CIO at Tikehau Capital, highlighted opportunities in private credit, private equity, and real estate: “We see opportunities especially in private credit, with a very attractive risk-return ratio, always selectively. We are more cautious about capital investment and bet on megatrends such as energy transition. We also see opportunities in real estate, a sector that has been quiet in recent years but now could be an opportunity to buy at a discount.”

In the realm of liquid alternatives – already outside private markets – Philippe Uzan, Deputy CEO, CIO Global Asset Management at IM Global Partner, highlighted the opportunity in vehicles with liquidity as the basis: “The most important change in recent times is the fact that cash has returned and offers more attractiveness than some bonds. We see opportunities in products that use cash as the basis, such as some liquid alternatives: they could be attractive to generate diversification and absolute returns tactically,” he added.

The Momentum of Private Credit

Returning to private markets, many speakers highlighted the opportunity that private credit investment represents now. “There is a lot of growth potential in everything related to private credit: it only accounts for 12% of these markets,” said Foscari from Amundi. He defended the benefits of private markets for improving portfolio diversification and as sources of alpha, capturing the illiquidity premium, taking advantage of and managing different stages of the cycle, and exposure to different managers. In a higher interest rate scenario, he showed his bet on opportunities in private credit and infrastructure.

“The momentum for private credit is very good for several reasons: while I don’t think returns will be as strong this year as in the past, they can still offer double-digit yields,” also recalled Gaetan Aversano, MD, Deputy Head, Private Markets Group at Union Bancaire Privée, UBP. The expert mentioned the advantages of this asset, which in his opinion faces better times than traditional fixed income, with higher volatility. “There is room for both assets, but private credit is experiencing stronger momentum than a few years ago,” he added.

José María Martínez-Sanjuán, Global Head of Fund Selection at Santander Private Banking, also described an attractive environment. He cited a Preqin survey, according to which 50% of investors seek to increase their allocation to the asset, and 35% want to maintain their positions, showing the strength of demand, which can be explained by attractive yields offered – higher than other fixed income assets –, stable spreads over time, or diversification (allowing exposure to sectors not represented in traditional indices), among other factors such as restrictions on lending activity by banks following Basel IV.

The arguments and investment possibilities favor private credit, something the expert sees in his institution, with direct lending as one of the favorite strategies. “At Santander, we have $3.1 billion in the alternative business, which has experienced strong growth in recent years at a rate of 23%-25%, but the penetration ratio is only 1%, leaving much room for growth,” he recalled. “Almost 35% of our clients are invested in private credit, and 80% of that volume – around 800 million euros – is invested in direct lending, the most popular and senior strategy within the asset, offering advantages such as not having to navigate a company’s capital structure to achieve attractive returns, similar to equity but with more seniority,” he explained at the Fund Forum in Monaco.

Among the asset’s risks, Gaetan mentioned a higher interest rate scenario for a longer time, which could put some companies under pressure and increase defaults, raising dispersion and the importance of manager selection.

Private Credit in a Fixed Income Allocation

For Candriam experts, private credit is also a favorite in their fixed income allocation: “It makes sense to invest across the entire credit market spectrum, with a particular conviction in IG but also opportunities in assets like private credit. With good asset allocation and stock selection, you can achieve good levels of yield and diversification,” defended Nicolas Forest, CIO of the manager, at the forum.

At the firm, they maintain their conviction in investment grade credit in Europe, which has become a “core” asset in portfolios, as it offers stable returns and provides diversification; they bet on global high yield in the long term, benefiting from improved quality and technical factors (excluding U.S. HY, because it is expensive); and they highlight the diversification potential offered by private credit in Europe, also benefiting from increased mergers and acquisitions activity. Their private credit fund – in collaboration with manager Kartesia – invests, through primary and secondary markets, in small and medium-sized European companies and has provided a solid track record of risk-adjusted returns over time.

The Scenario of EdR AM for the Second Half of the Year: “Nearly Ideal” Economic Environment and New Political Obstacles

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Edmond de Rothschild AM unveiled in its investment outlook for the second half of 2024 that the scenario investors will face in the latter half of the year will be marked by a “nearly ideal” economic environment but also by new political obstacles.

The economic environment is more favorable than expected for capital markets for three reasons, according to the firm. Firstly, disinflation continues its course, despite its non-linear trajectory and the fact that the last phase of disinflation normalization is the most challenging to execute. Additionally, labor shortages in the United States have finally begun to ease, supported by a significant influx of immigrants. Lastly, the economic scenario is influenced by interest rate cuts that have begun in Switzerland, Canada, and Europe. Edmond de Rothschild AM assures that “they should start before the end of summer in the United States, knowing that the Federal Reserve, despite all the surprises in terms of inflation, has ruled out the option of another rate hike.”

In this environment, experts remind us that historically, equity markets have recorded positive – and often solid – returns during economic landing periods preceding a first rate cut in the United States. The prospect of monetary easing, starting from decent levels, continues to suggest that the Fed will effectively manage the slowdown and avoid a recession.

Benjamin Melman, Global CIO of Edmond de Rothschild AM, states that observing the returns recorded so far this year, “it seems that history repeats itself, which reinforces our conviction that, given the strength of the global economy, it makes sense to remain well-exposed to equities.” The expert admits that since the beginning of the year, he has been tactically oscillating between neutrality and overexposure, but also that when the Fed first lowers its benchmark rates, “we will have time to review the economic outlook and adjust our main allocation decisions,” though for now, “confidence prevails.”

Can Political Turmoil in France Become a European Financial Crisis?

If the “Rassemblement National” party wins or in the case of a “fragmented Parliament,” it is possible – though unlikely – that the new French government will embark on a spending program that expands the deficit, according to EdR AM. They emphasize that this situation “will not prevent Brussels from opening an Excessive Deficit Procedure,” and that “credit agencies could continue downgrading France’s rating.”

The OAT-Bund spread could widen a bit more, according to the firm, “but a major crisis seems avoidable, especially if the prospect of reducing the deficit is postponed and not buried if Brussels and Paris reach a mid-term agreement.” A favorable scenario could even be imagined in the case of a “fragmented Parliament” and a new political reshuffle, which could lead to an alliance between “governmental” parties of the left, center, and right, allowing the country to continue its initial commitment to reducing the public deficit.

So far, European assets have benefited from an increasingly favorable combination of factors: a stronger-than-expected economy, ongoing disinflation, and a European Central Bank that has taken the reins of monetary policy. Furthermore, the proximity of the U.S. elections is causing a wait-and-see attitude across the Atlantic. However, Edmond de Rothschild AM’s investment teams have chosen not to overweight European assets, waiting for the unstable political balance in France to become clearer, with its implications for Europe.

U.S. Presidential Elections

While the re-election of President Joe Biden would not have significant repercussions on capital markets, the return of Donald Trump to the White House is expected to have implications, according to the firm. Firstly, it would be negative for long-term sovereign bonds due to an inflationary policy involving crackdowns on immigration and plans to deport 11 million undocumented immigrants, as well as new import taxes and a fiscal policy that would not reduce but rather increase the country’s significant public deficit.

However, it would be positive for equities, “especially thanks to the return of a deregulation policy and plans to renew the tax cuts he initiated in 2016, including a possible reduction in corporate tax.” However, the firm notes that while it is difficult to assess the pressure that would be exerted on long-term rates, if long-term yields were to rise too quickly, “it would have adverse effects on equity markets.”

Investment Policy for the Second Half of the Year

Melman recalled that a year ago, the economy posed many questions, “as disinflation remained timid and in the United States, a recession was feared.” However, he now admits that political difficulties were quite contained at that time. “Since then, the issues have reversed. While the economic environment now seems quite promising, it is being overshadowed by political problems. The only constant has been the continued deterioration of the geopolitical environment. This means that there may be some volatility, triggered by French political turmoil or the potential return of Trump to the White House. The good news is that markets can sometimes overreact to political crises, and this can create some attractive opportunities.”

Consequently, Edmond de Rothschild AM’s investment teams are confident in both equities and fixed income. Regarding the latter, they are considering reducing their exposure to long maturities, but as late as possible, to take into account the U.S. elections. In fact, if the economic slowdown materializes quickly in the United States, “all fixed income markets would benefit.”

Within equity markets, while major geographical decisions (United States vs. Europe) will be largely determined by the aforementioned political issues, the investment teams have a preference for Big Data and Health, and for European small-cap companies, which trade at very attractive valuations given the more favorable economic environment and the monetary easing that has already begun.

In fixed income, Edmond de Rothschild AM continues to favor carry strategies and hybrid debt (both corporate and financial) and plans to increase its exposure to emerging debt once the Fed’s pivot signal is strong enough.

Assets in UCITS and AIF Funds Doubled Over the Last Decade to Reach €20.7 Trillion

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The European Fund and Asset Management Association (EFAMA) has published its annual Fact Book on the behavior and main trends of the European investment fund industry, as well as a general review of regulatory developments in the 29 European countries. One of its main conclusions is that in the last decade, assets in UCITS and AIFs (alternative investment funds) have doubled, reaching €20.7 trillion, demonstrating the industry’s robustness.

“This year’s Fact Book shows that UCITS are delivering good returns with declining costs, attracting both European and foreign investors. While this is good news for the financial well-being of those investors, there are still too many European households not reaping the benefits of investing in capital markets. This is a crucial year of change within EU institutions, with a clear recognition by lawmakers that we need to further encourage retail investment to address the pension gap and support economic growth. To achieve this, we need decisive actions that simplify investment, reduce bureaucracy, and bring us closer to a Savings and Investment Union,” says Tanguy van de Werve, Director General of EFAMA.

Among the data collected in the report, it is noted that net sales of fixed-income UCITS in 2023 were greatly influenced by the evolution of interest rates. Net inflows were driven by the pause in central bank rate hikes and expectations of rate cuts in 2024. It also highlights that inflows into money market funds were mainly driven by short-term interest rates. In contrast, multi-asset UCITS funds experienced their first net outflows in ten years.

One of the trends identified in the report regarding UCITS funds is that large vehicles are gaining more importance in the European market. “UCITS funds with less than €100 million represented less than 4% of the total net assets of UCITS in 2023, with a market share that is gradually decreasing. At the same time, the share of funds with more than €1 billion in net assets is increasing,” the report indicates.

According to the document, the share of US equities in the allocation of equity UCITS has increased significantly. Specifically, it doubled from 22% to 44% in the last decade. EFAMA explains, “This is because US equity markets outperformed Europe, particularly large US tech stocks.”

The Appeal of UCITS Funds

One reason European market funds are attractive is their costs, which, according to EFAMA’s report, have been gradually decreasing. In fact, between 2019-2023, the average cost of long-term active UCITS decreased from 1.16% to 1.06%, while UCITS ETFs dropped from 0.23% to 0.21%. “This trend is expected to continue, driven by greater transparency in fund fees and intensified competition among asset managers,” they indicate.

According to EFAMA, foreign investors are an increasingly significant group of EU fund buyers. Evidence of this is that, in the past five years, foreign investors purchased an annual average of €276 billion in EU investment funds. In comparison, €174 billion were sold cross-border within the EU, and €196 billion were bought domestically.

Additionally, EU retail investors continued to buy funds in 2023 but shifted their focus to bonds. “Given the reluctance of banks to increase interest rates on savings accounts, national governments in countries like Italy and Belgium successfully attracted domestic retail savers by offering bond issues with higher yields,” the report indicates.

In general terms, the average annual performance of all major types of UCITS was positive. Equity UCITS delivered an average of 14.2%, multi-asset UCITS generated 8.7%, bond UCITS 5.7%, and money market funds 3.3%. “With an EU inflation rate of 3.4% for the year, most UCITS proved to be an excellent investment option in 2023,” EFAMA adds.

Sustainable Investment

Something that caught EFAMA’s attention is that sales of sustainable funds slowed down. “Net sales of dark green Article 9 SFDR funds declined compared to 2022. Conversely, Article 6 funds (without a sustainability focus) saw a shift, attracting €41 billion in net inflows. These trends were mainly driven by the growing popularity of ETFs, as most ETFs are Article 6,” the report indicates.

New York Remains the World’s Richest City in 2024

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New York, the San Francisco Bay Area and Tokyo are the three wealthiest cities in the world, according to the latest report by Henley & Partners.

“The document offers a fascinating view of the changing face of global wealth, revealing a landscape where investment migration programs have emerged as a powerful tool for high-net-worth individuals looking to capitalize on the world’s most promising cities,” highlights Juerg Steffen, Chief Executive Officer of Henley & Partners.

The report shows the clear leadership of the United States, with 11 cities within the ranking of the world’s 50 richest cities. At the top is New York, with an astonishing 349,500 millionaires, followed by the Northern California Bay Area (305,700) and Los Angeles (212,100). “China also has a notable presence, with five cities in mainland China and seven cities if we count Hong Kong (a Special Administrative Region of China) (143,400) and Taipei (30,200). Beijing (125,600 millionaires), Shanghai (123,400), Shenzhen (50,300), Guangzhou (24,500), and Hangzhou (31,600) have seen significant increases in their millionaire populations over the past decade,” points out Steffen. In his opinion, this dynamic reflects broader changes in the global economy, where the United States maintains its traditional strongholds, while China’s rapid urbanization and growing technological prowess play an increasingly important role in wealth creation.

Focusing on the table, New York leads with 349,500 millionaires, 744 centimillionaires (with investable wealth of over $100 million), and 60 billionaires who, together, surpass $3 trillion, which is more than the total wealth of most major G20 countries. Hot on its heels, in second place, is the Northern California Bay Area, which includes San Francisco and Silicon Valley. “The Bay Area has enjoyed one of the highest wealth growth rates in the world, increasing its millionaire population by a massive 82% over the past decade, and now hosts 305,700 millionaires, 675 centimillionaires, and 68 billionaires,” notes Steffen.

Regarding Tokyo, which topped the group as the world’s richest city for a decade, it has suffered a 5% decrease in its resident high-net-worth individual (HNWI) population over the last ten years, and now ranks third with just 298,300 millionaires. Notably, the city-state of Singapore has risen two places to fourth in the global ranking after an impressive 64% increase in millionaires over the past 10 years, and it seems likely to soon overtake Tokyo as the richest city in Asia. Widely considered the world’s most business-friendly city, Singapore is also one of the top destinations globally for migrating millionaires: approximately 3,400 high-net-worth individuals moved there in 2023 alone, and the city now boasts 244,800 millionaire residents, 336 centimillionaires, and 30 billionaires.

The Decline of London

London, the world’s richest city for many years, continues to fall in the rankings and now occupies fifth place with only 227,000 millionaires, 370 centimillionaires, and 35 billionaires, a 10% decrease over the past decade. In contrast, Los Angeles, home to 212,100 millionaires, 496 centimillionaires, and 43 billionaires, has risen two places over the 10-year period to sixth place, enjoying a remarkable 45% growth in its wealthy population. Paris, the richest city in continental Europe, maintains its seventh place in the ranking with 165,000 millionaire residents, while Sydney climbs to eighth with 147,000 HNWIs, after experiencing exceptionally strong wealth growth over the past 20 years.

“The 24% gain in the S&P 500 last year, along with the 43% rise in the Nasdaq and the staggering 155% rebound in Bitcoin, have boosted the fortunes of wealthy investors. Additionally, rapid advancements in artificial intelligence, robotics, and blockchain technology have provided new opportunities for wealth creation and accumulation. However, even as new opportunities arise, old risks persist. The war in Ukraine, which has seen Moscow’s millionaire population drop by 24% to 30,300, is a stark reminder of the fragility of wealth in an uncertain and unstable world,” adds Steffen, who considers a key factor driving growth in the world’s richest cities to be the strong performance of financial markets in recent years.

China’s Millionaire Boom

China has established a notable presence in the latest ranking of the world’s 50 richest cities, with 5 cities in mainland China on the list and 7 cities if we include Hong Kong (a Special Administrative Region of China) (with 143,400 millionaires) and Taipei (30,200). Beijing (125,600 millionaires) is ranked in the Top 10 for the first time after a 90% growth in its millionaire population over the past decade. Although Hong Kong has dropped four places over the 10-year period to ninth in the ranking, Shanghai (123,400), Shenzhen (50,300), Guangzhou (24,500), and Hangzhou (31,600) have seen significant increases in their millionaire populations.

Andrew Amolis, head of research at New World Wealth, explains that Shenzhen is the world’s fastest-growing city for the wealthy, with its millionaire population soaring by 140% over the past ten years. “Hangzhou has also seen a massive 125% increase in its number of high-net-worth residents, and Guangzhou’s millionaires have grown by 110% over the past decade. When it comes to potential wealth growth over the next decade, cities to watch include Bengaluru (India), Scottsdale (USA), and Ho Chi Minh City (Vietnam). All three have enjoyed exceptional growth rates of over 100% in their resident millionaire populations over the past ten years.”

As for the Middle East, Dubai easily takes the crown as the region’s richest city, with an impressive 78% growth in its millionaire population over the past 10 years. Currently ranked as the 21st richest city in the world, it is very likely that this modern wealth magnet will enter the Top 20 in the coming years. Although Abu Dhabi, the oil-rich capital of the United Arab Emirates, has yet to secure a spot in the Top 50 ranking, growth rates above 75% make it a likely contender in the future.

While no African or South American city features among the world’s 50 richest cities, the report identifies several rising stars that could well join the ranks of the world’s leading wealth centers in the near future. Nairobi, Kenya’s bustling capital, now has 4,400 millionaires, a 25% increase over the past decade, driven by its thriving tech ecosystem and growing middle class. Cape Town, South Africa’s stunning coastal jewel, has enjoyed a 20% increase in millionaires, making it the country’s preferred city, now home to 7,400 of them.

World’s Most Expensive Cities

Monaco, arguably the world’s top safe haven for the super-rich, where average wealth exceeds $20 million, is also the world’s highest-ranked city in terms of per capita wealth. More than 40% of the Mediterranean principality’s residents are millionaires, the highest proportion of any city globally. It also tops the list of the world’s most expensive cities, with apartment prices regularly exceeding $35,000 per square meter.

New York City ranks second, with prime real estate prices averaging $28,400 per square meter, followed by London ($26,500 per m²), Hong Kong ($25,800 per m²), Saint-Jean-Cap-Ferrat in France ($25,000 per m²), and Sydney ($22,700 per m²).

Dominic Volek, group head of private clients at Henley & Partners, says that 7 of the world’s 10 richest cities are in countries that host investment migration programs actively encouraging foreign direct investment in exchange for residency or citizenship rights. “You can secure the right to live, work, study, and invest in major international wealth hubs such as New York, Singapore, Sydney, Vienna, and Dubai through investment. Being able to relocate yourself, your family, or your business to a more favorable city or having the option to choose from several different cities around the world is an increasingly important aspect of international wealth and legacy planning for private clients. The more jurisdictions a family can access, the more diversified their assets will be, the lower their exposure to regional and country-specific risks, and the greater the opportunities they will be able to enjoy. Similarly, cities and countries can use investment migration as an innovative funding mechanism to attract the world’s wealthiest and most talented to their shores,” concludes Volek.