Hedging
Millionaires Buy Jets, Art, Bling, Give Less to Charity By Katya Kazakina
- Jun 24, 2010
As millionaires’ assets rebounded in 2009, they put
more money in tangibles such as art, jets and gems, according
to a report released this week by Capgemini SA and Merrill
Lynch & Co.
“It was such a severe crisis, the investor psyche
has really shifted,” said Ileana van der Linde, the
Capgemini principal who managed the research, in a phone
interview. “They don’t fully trust the financial
markets and regulatory bodies. That’s why we are seeing
a trend toward putting money into tangible assets like art
and gold.”
Almost 30 percent of the world’s millionaires withdrew
their assets or left wealth-management firms in 2008, when
the Standard & Poor’s 500 Index dropped 38 percent,
according to an earlier survey by Capgemini and Merrill.
The index has gained 22 percent in the past 12 months.
Six “passion” investments listed in the “World
Wealth Report” typically account for about a third
of a millionaire’s total holdings, Van der Linde said:
luxury collectibles such as yachts, jets and high-end cars;
art; jewelry, gems and watches; other collectibles such
as wine and coins; sports investments, including teams and
race horses; and a “miscellaneous” category
comprising club memberships, musical instruments and other
items.
Most individuals with assets ranging from $1 million to
$5 million, excluding primary residences, had 30 percent
in luxury collectibles in 2009, up from 27 percent in 2008.
‘I Have Arrived’
“These are status symbols you can overtly show,”
Van der Linde said. “They say, ‘I have arrived.’”
For those with more than $30 million in investments, art
was the largest of the six passions, the report said.
More investors began adding art, coins, wine and antiques
to their portfolios. Investors in India, China and the Middle
East tend to hold art and other tangible assets as an inflation
hedge, the report said.
“In emerging economies, art has been part of the
overall investment portfolio for a while,” said Van
der Linde. “Now you are starting to see the same trend
in the mature markets.”
The annual wealth survey covered 71 countries and drew
on interviews with 1,200 wealth managers who serve 150,000
clients. There were many regional differences in spending
trends.
American and Japanese millionaires spent the most on luxury
collectibles. Europeans and Latin Americans put more emphasis
on art. The rich in the Middle East and Asia focused on
jewelry, gems and watches, according to the study.
Giving Less
Philanthropy was another area where the wealthy have become
more focused and cautious in the aftermath of the financial
crisis, Van der Linde said. In the U.S., total charitable
contributions fell 3.6 percent in 2009 to $303.75 billion
from $315.08 billion in 2008, according to Giving USA Foundation.
With less to give, donors are being more selective in their
philanthropic activity.
“It’s not just blanketing several charities
and hoping for the best,” said Van der Linde. “They
are now looking to wealth management firms for advice on
how to make philanthropy part of their investment planning.”
The U.S. had 2.87 million millionaires, topping Japan and
more than triple third-ranked Germany with 861,500, the
report said. The number of millionaires in China soared
31 percent to 477,400, keeping the country ahead of the
U.K. with 448,100.