грегор еразім

In collaboration with 2

Gregor Erasim

Vice President, Global Financial Services

Capgemini


Market Sizing and Growth


Globally, the number of HNWIs increased 17.1% in 2009 to 10.0m, led by sharp increases in Asia-Pacific and North-America

2006 2007 2008 20090

3

5

8

10

3.2 3.32.7

3.1

3.0 3.1

2.6

3.0

2.62.8

2.4

3.0

0.40.4

0.4

0.50.30.4

0.4

0.40.1

0.1

0.1

0.1

# H

NW

Is (

Mill

ions

)

Number of HNWIs by Region (Millions), 2006-2009

Growth (08-09): 17.1%

Total 9.5 m

CAGR (06-08): -5.0%

Source: Capgemini Lorenz curve analysis, 2010Note: Chart numbers may not add up due to rounding

Total 10.1 m

Total 8.6 m

Total 10.0 m

Globally, the number of HNWIs nearly returned to 2007 levels, with Asia-Pacific region catching up with Europe in terms of the number of HNWIs.Globally, the number of HNWIs nearly returned to 2007 levels, with Asia-Pacific region catching up with Europe in terms of the number of HNWIs.

Annual Change 2008 - 2009

Europe

NorthAmerica

Asia-Pacific

Latin America

Middle East

Africa

25.8%

16.6%

12.5%

8.3%

13.2%

7.1%


A similar growth pattern was evident for HNWI Financial Wealth, which saw a 18.9% rise in 2009 to $39.0T from $32.8T in 2008

2006 2007 2008 20090

10

20

30

40

50

11.3 11.79.1 10.7

10.1 10.7

8.39.5

8.49.5

7.4

9.7

5.1

6.2

5.8

6.71.4

1.7

1.4

1.50.9

1.0

0.8

1.0

HN

WI

Fin

anci

al W

ealth

($U

SD

Tril

lions

)

HNWI Financial Wealth by Region ($ USD Trillions), 2006-2009

Growth (08-09): 18.9%

Total 37.2 T

CAGR (06-08): -6.2%

Total 40.7 T

Total 32.8 T

Source: Capgemini Lorenz curve analysis, 2010Note: Chart numbers may not add up due to rounding

In 2009, Latin America and Asia-Pacific were the only regions to exceed the 2007 HNWI wealth level, with Asia-Pacific surpassing Europe in HNWI wealthIn 2009, Latin America and Asia-Pacific were the only regions to exceed the 2007 HNWI wealth level, with Asia-Pacific surpassing Europe in HNWI wealth

Total 39.0 T

Annual Change 2008 - 2009

Europe

NorthAmerica

Asia-Pacific

Latin America

Middle East

Africa

30.9%

17.8%

14.2%

15.0%

20.2%

5.1%


In 2009, 8 out of the 10 countries with highest growth in HNWI population were from the Asia-Pacific region

Source: Capgemini Lorenz curve analysis, 2010; (2) EIU, February 2010; (3) World Federation of Exchanges, 2010;Note: GDP refers to nominal GDP

Hon

g K

ong

Indi

a

Isra

el

Tai

wan

Aus

tral

ia

Sin

gapo

re

Chi

na

Indo

nesi

a

Nor

way

Vie

tnam

0%

20%

40%

60%

80%

100%

120%

104.4%

50.9%

42.7% 42.3%

34.4% 32.7% 31.0% 28.2% 27.5%24.4%H

NW

I P

opul

atio

n G

row

th (

%)

Notable Countries with High HNWI Population Growth (%), 2008-09

HNWI population in Hong Kong and India increased significantly in 2009, after they experienced the highest drop in HNWI population in 2008.HNWI population in Hong Kong and India increased significantly in 2009, after they experienced the highest drop in HNWI population in 2008.

Country Specific CommentaryCountry Specific Commentary

Hong Kong:• After a fall of approximately 50% in 2008, the Hong Kong

stock exchange rebounded strongly (up 73.5%) in 2009• A large percentage of HNWIs who had dropped into the

“mass affluent” band in 2008, returned back to the $1mn+ wealth band in 2009

India:• In 2009, Indian stock markets more than doubled • The economic outlook of India was very strong, growing

nearly 7% during this period

Israel:• Israel was the third highest gainer of HNWI population in

2009, driven by high growth in stock market (40%) and real estate prices (15.5%)

China:• Chinese stock market grew over 100%• Chinese economy grew at 8.3%

Singapore:• Singapore stock exchange grew by 81.6%

Hong Kong:• After a fall of approximately 50% in 2008, the Hong Kong

stock exchange rebounded strongly (up 73.5%) in 2009• A large percentage of HNWIs who had dropped into the

“mass affluent” band in 2008, returned back to the $1mn+ wealth band in 2009

India:• In 2009, Indian stock markets more than doubled • The economic outlook of India was very strong, growing

nearly 7% during this period

Israel:• Israel was the third highest gainer of HNWI population in

2009, driven by high growth in stock market (40%) and real estate prices (15.5%)

China:• Chinese stock market grew over 100%• Chinese economy grew at 8.3%

Singapore:• Singapore stock exchange grew by 81.6%

All nine of these countries surpassed 2007 HNWI

population levels

In-spite of this dramatic growth HNWI population in 2009 was only 79% of the HNWI population in 2007


The global HNWI population still remains concentrated with the top three markets accounting for 53.5% of global HNWIs

Source: Capgemini Lorenz curve analysis, 2010

The top 12 countries by HNWI Population remain the same from 2008, but countries from Asia-Pacific have higher growth rates compared to other regions.The top 12 countries by HNWI Population remain the same from 2008, but countries from Asia-Pacific have higher growth rates compared to other regions.

US

Japa

n

Ger

man

y

Chi

na UK

Fra

nce

Can

ada

Sw

itzer

land

Ital

y

Aus

tral

ia

Bra

zil

Spa

in

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2,460

1,366

810

365 362 346 213 185 164 129 131 127

2,866

1,650

861

477 448 383 251 222 179 174 147 143

2008 2009

Num

ber

of H

NW

Is (

k)

HNWI Population by Country (k) , 2008 - 2009

1

2008

Ran

ks

2 3 4 5 6 7 8 9 11 10 12

53.5% of total worldwide HNWI population (54%

in 2008)

16.5%

HN

WI g

row

thR

ate(

%)

2008

-200

9

20.8% 6.4% 31.0% 23.8% 10.8% 17.9% 19.7% 9.2% 34.4% 11.9% 12.5%

Australia moved back to 10th position by overtaking Brazil.


Canada US Germany UK France Russia Poland Japan Singapore India China Mexico Brazil-10

-5

0

5

10

0.4 0.41.3

0.5 0.3

5.65.0

-1.2

1.4

6.1

9.6

1.5

5.1

-2.6 -2.4

-5.0 -5.0

-2.2

-7.9

1.7

-5.2

-2.0

6.8

8.7

-6.6

-0.2

2008 2009

However, China and India avoided the trend with strong GDP growth in both 2008 and 2009.However, China and India avoided the trend with strong GDP growth in both 2008 and 2009.

Real GDP Growth Rates (%),2008-2009

North America

Latin AmericaWestern Europe Asia Pacific

GDP Contracted in the Majority of the Countries in 2009, Highlighting a Strong Economic Interdependence Worldwide

EasternEurope

Per

cent

Cha

nge

(%)

Source: Economist Intelligence Unit – April 2010. Real GDP variation over previous year.


2002 2003 2004 2005 2006 2007 2008 20090

20,000,000,000,000

40,000,000,000,000

60,000,000,000,000

80,000,000,000,000

Global Market Capitalization Rose Nearly 47% in 2009, and Reached $47.9 Trillion

Market Capitalization by Region (USD Trillions), 2002 - 2009

Source: World Federation of Exchanges, January 2010

Asia Pacific

Europe / Middle East / Africa

Americas

22.832.6

63.4

CAGR (’02-’07)22.7%

CAGR (’07-’08) (48.6%)

US

D T

rillio

ns

47.9

CAGR (’08-’09)47.1%

Global markets lost the last five years of growth in 2008, but they rebounded in 2009 across all regions and recovered nearly three years of growth.Global markets lost the last five years of growth in 2008, but they rebounded in 2009 across all regions and recovered nearly three years of growth.

31.5

37.6

52.2

42.9

APAC: 73.6%

EMEA: 38.0%

Americas: 35.8%


0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09

After Reaching Record Highs in 2008, Volatility Levels Plunged Sharply in 2009

CommentaryCommentary

Although volatility levels dropped significantly in 2009, they still remain above the highs reached during previous crises over the last decade.

Although volatility levels dropped significantly in 2009, they still remain above the highs reached during previous crises over the last decade.

• The daily volatility peaked to 1.11% in Oct 1998, during the Russian Financial Crisis (right after the crisis in Asia)

• As the tech bubble reached its trough, the daily volatility peaked again, to 1.25%, before dropping back to 0.5% in 2004

• During the summer of 2007, the index started an upward trend that skyrocketed in mid-September 2008 to reach 2.56%, more than double the values of previous crises

• Volatility levels were at 2.48% at the beginning of 2009, but plunged sharply in 2009 and ended the year at 1.30%

• There is a very high correlation between this measure and the Chicago Board of Exchange (CBOE) VIX index, which is also known as the “fear” index and is based on the implicit volatility in options pricing

• The daily volatility peaked to 1.11% in Oct 1998, during the Russian Financial Crisis (right after the crisis in Asia)

• As the tech bubble reached its trough, the daily volatility peaked again, to 1.25%, before dropping back to 0.5% in 2004

• During the summer of 2007, the index started an upward trend that skyrocketed in mid-September 2008 to reach 2.56%, more than double the values of previous crises

• Volatility levels were at 2.48% at the beginning of 2009, but plunged sharply in 2009 and ended the year at 1.30%

• There is a very high correlation between this measure and the Chicago Board of Exchange (CBOE) VIX index, which is also known as the “fear” index and is based on the implicit volatility in options pricing

Source: Dow Jones World (W1) Index – Daily close values from January 1st, 1997 to June 9th, 2010 a. As calculated by Capgemini

Daily Volatility of DJ World Index a, January 1997 – June 2010

Dai

ly V

ola

tilit

y o

f D

J W

orl

d In

dex

(%

)

Russian Crisis

Russian Crisis

Sept 11, 2001

Sept 11, 2001

Tech BubbleTech

Bubble

Q4 2008Q4

2008

Asian Debt Crisis

Asian Debt Crisis

June 2010June 2010


Key Findings – Market Sizing & Growth

Note: (a) HNWIs hold at least US$1 million in financial assets excluding primary residences, collectibles, consumables, and consumer durables(b) Ultra-HNWIs hold at least US$30 million in financial assets excluding primary residences, collectibles, consumables, and consumer durables

• In 2009, HNWI population and wealth nearly returned to 2007 levels: – In 2009, the world’s high net worth individual (HNWI) population increased by 17.1% to 10.0m and their wealth

increased by18.9% to US$39.0T from 2008 levels.

– The Asia-Pacific region caught up with Europe in terms of HNWI population, while the Asia-Pacific HNWI wealth surpassed the HNWI wealth in Europe

• Global HNWI population remains highly concentrated:– In 2009, the U.S, Japan and Germany still accounted for 53.5% of the world’s HNWI population, down slightly from

2008.

• The spillovers from the global financial crisis negatively affected GDP growth in 2009 and governments worldwide stepped up efforts to stimulate economic recovery and boost the financial system

• Key drivers of wealth such as Market Capitalization, Commodities, Hedge Funds had a year of strong gains

• Going forward a sustained economic recovery remains a cause of concern: – World GDP growth is likely to be positive in 2010-11 and is expected to be led by Asia-Pacific (ex Japan). However,

policymakers across the world are working on formulating viable government stimulus exit strategies.


Asset Allocation


2006 2007 2008 2009 2011F0%

25%

50%

75%

100%

31% 33%25% 29%

35%

21%27%

29%31%

31%

14%

17%21%

17%13%

24%

14% 18% 18% 14%

10% 9% 7% 6% 8%

%

After 2008, HNWI allocations to cash dropped back to 2007 levels as proportion of their assets held in Fixed Income and Equities rose

Breakdown of HNWI Financial Assets (%), 2006 to 2011F

a. Includes structured products, hedge funds, derivatives, foreign currency, commodities, private equity, venture capitalb. Comprises commercial real estate, real estate investment trusts (REITs), residential real estate (excluding primary residence), undeveloped property, farmland and otherSource: March 2007, April 2008 , March 2009 and March 2010 Capgemini/ Merrill Lynch FA survey; World Federation of Exchanges, March 2010; Bloomberg Businessweek, Money Report, March 2010

Equities

Fixed Income

Cash / Deposits

Real Estate b

AlternativeInvestments a

Key PointsKey Points

• Fixed Income allocations increased as HNWIs continued to place greater emphasis on predictable cash flows:– Barclays Capital Global Aggregate Bond Index

retuned 9% since December 2008.

• The proportion of HNWI assets held in equities in 2009 increased slightly as stock markets across regions rebounded:– Stock markets recovered in most of the countries

and global market capitalization rose to $47.9 trillion in 2009 from $32.6 trillion in 2008, a growth of nearly 47%

• Allocations to Cash/Deposits decreased as HNWIs preferred investments in Fixed Income and Equities with a view of recouping some of the losses made in 2008

• Fixed Income allocations increased as HNWIs continued to place greater emphasis on predictable cash flows:– Barclays Capital Global Aggregate Bond Index

retuned 9% since December 2008.

• The proportion of HNWI assets held in equities in 2009 increased slightly as stock markets across regions rebounded:– Stock markets recovered in most of the countries

and global market capitalization rose to $47.9 trillion in 2009 from $32.6 trillion in 2008, a growth of nearly 47%

• Allocations to Cash/Deposits decreased as HNWIs preferred investments in Fixed Income and Equities with a view of recouping some of the losses made in 2008

By 2011, HNWI allocations to Equities is expected to increase an additional six percentage points as HNWIs regain their risk appetite and confidence in markets.By 2011, HNWI allocations to Equities is expected to increase an additional six percentage points as HNWIs regain their risk appetite and confidence in markets.


Proportion of HNWI assets held in Equities was highest in North America while that held in Real Estate was highest in Asia-Pacific ex. Japan

Global Average

Asia-Pacific

ex. Japan

Japan Europe Latin Amer-ica

Middle East

North America

0%

25%

50%

75%

100%

29% 33%

19%26% 25% 23%

36%

31%16%

25%

30%39%

25%

35%

17%

18% 29%

19%

13%

21%

12%

18%28%

23% 18% 16%23%

14%

6% 5% 4% 7% 7% 8% 4%

%

Breakdown of HNWI Financial Assets by Region (%), 2009

Fixed Income

Equities

Cash/Deposits

Real Estate b

Alternative Investments a

a. Includes structured products, hedge funds, derivatives, foreign currency, commodities, private equity, venture capital.b. Comprises commercial real estate, real estate investment trusts (REITs), residential real estate (excluding primary residence), undeveloped property, farmland and otherSource: March 2010 Capgemini/ Merrill Lynch FA survey ; Asia Investment Market View 2H 2009, CBRE Research, Asia, CB Richard Ellis, Accessed March 2010

Key PointsKey Points

• In North America, equity holdings edged up from 34% of total holdings in 2008 to 36% in 2009 as stock values rose

• Asia-Pacific ex. Japan HNWIs increased allocations to Real Estate:– Direct real estate investment in the region

jumped 56% y-o-y in the second half of 2009 to an estimated US$25 billion

• In Europe equity holdings increased to 26% from 21% in 2008 as stock values rose:– European stock market capitalization grew by

38%

• Middle East allocation that traditionally focus on Real-Estate, decreased allocation from 25% in 2008 to 23% as hotspots such as Dubai witnessed a major slump in demand

• In North America, equity holdings edged up from 34% of total holdings in 2008 to 36% in 2009 as stock values rose

• Asia-Pacific ex. Japan HNWIs increased allocations to Real Estate:– Direct real estate investment in the region

jumped 56% y-o-y in the second half of 2009 to an estimated US$25 billion

• In Europe equity holdings increased to 26% from 21% in 2008 as stock values rose:– European stock market capitalization grew by

38%

• Middle East allocation that traditionally focus on Real-Estate, decreased allocation from 25% in 2008 to 23% as hotspots such as Dubai witnessed a major slump in demand

HNWIs from Latin America and Japan were the most conservative, allocating in excess of 52% to Cash/Deposits and Fixed Income, despite rebound in markets. HNWIs from Latin America and Japan were the most conservative, allocating in excess of 52% to Cash/Deposits and Fixed Income, despite rebound in markets.


HNWI geographic allocations to North America and Europe decreased in 2009, while those to Asia-Pacific and Latin America increased

Breakdown of HNWI Geographic Asset Allocation (%), 2006 - 2011F

Source: March 2007, April 2008, March 2009 and March 2010 Capgemini/ Merrill Lynch FA survey; World Federation of Exchanges, March 2010

2006 2007 2008 2009 2011F0%

25%

50%

75%

100%

43.00% 42% 39% 37.70% 37.40%

25.00% 25%27%

22.60% 20.20%

21.00% 20% 19%22.20% 24.60%

7.00% 9% 11% 12.70% 12.70%

2.00% 3% 3% 2.80% 2.90%2.00% 1% 1% 1.90% 2.20%

%

North America

Europe

Asia-Pacific

Middle East

Latin America

AfricaKey PointsKey Points

• In 2009, HNWIs increased allocation to emerging markets in search of higher returns and diversification of portfolios:– Allocation to Asia-Pacific increased by 3

percentage points and Latin America increased by 2 percentage points from 2009 to 2011 as the equity markets in these regions grew by 38% and 94% respectively

• From 2009 to 2011, allocation to all other regions are expected to remain stable except Asia-Pacific and Europe:– Allocation to Europe is expected to

decrease by 3 percentage points – Allocation to Asia-Pacific is expected to

increase by 3 percentage points

• In 2009, HNWIs increased allocation to emerging markets in search of higher returns and diversification of portfolios:– Allocation to Asia-Pacific increased by 3

percentage points and Latin America increased by 2 percentage points from 2009 to 2011 as the equity markets in these regions grew by 38% and 94% respectively

• From 2009 to 2011, allocation to all other regions are expected to remain stable except Asia-Pacific and Europe:– Allocation to Europe is expected to

decrease by 3 percentage points – Allocation to Asia-Pacific is expected to

increase by 3 percentage points

In 2011, due to the prospects of rapid growth and higher returns, Asia-Pacific is expected to surpass Europe as a HNWI investment destination.In 2011, due to the prospects of rapid growth and higher returns, Asia-Pacific is expected to surpass Europe as a HNWI investment destination.


By 2011, HNWIs from North America and Europe are expected to decrease allocations to home-region by more than 8 percentage points

2006 2007 2008 2009 2011F0%

20%

40%

60%

80%

100%

26%24%

18%21%

25%

52% 56% 65% 59% 48%

14% 11% 10% 11%15%

6% 6% 4% 5% 7%

2%2% 2% 3% 3%

1% 1% 2%2%

Breakdown of Predicted HNWI Geographic Allocation by Region (%), 2006 - 2011FEurope

2006 2007 2008 2009 2011F0%

20%

40%

60%

80%

100%

73% 76% 81% 76%

68%

12% 11% 8%9%

11%

10% 8% 6% 7%12%

4% 4% 3% 6% 7%

1% 1%1% 1% 1%

1% 1%1%

North America

Europe

North America

Asia PacificLatin America

AfricaMiddle East

Note: Data for the Middle East not depicted, however trend remains sameSource: March 2007, April 2008, March 2009 and March 2010 Capgemini/ Merrill Lynch FA survey

Europe

North America

Asia Pacific

Latin America

AfricaMiddle East

Key PointsKey PointsKey PointsKey Points

• North American HNWIs are expected to decrease their allocations to home-regions by 8 percentage points: – Allocations to Asia-Pacific region is expected to

increase by 5 percentage points in search of higher returns

• North American HNWIs are expected to decrease their allocations to home-regions by 8 percentage points: – Allocations to Asia-Pacific region is expected to

increase by 5 percentage points in search of higher returns

• European HNWIs are expected to decrease their allocations to home-regions by 9 percentage points:– Allocations to Asia-Pacific region is expected to increase

by 4 percentage points in search of higher returns– Allocations to North American region is expected to

increase by 4 percentage points in search of stable returns

• European HNWIs are expected to decrease their allocations to home-regions by 9 percentage points:– Allocations to Asia-Pacific region is expected to increase

by 4 percentage points in search of higher returns– Allocations to North American region is expected to

increase by 4 percentage points in search of stable returns


Key Findings – Asset Allocation

Note: a HNWIs hold at least US$1 million in financial assets excluding primary residences, collectibles, consumables, and consumer durables

• Post the financial crisis, HNWIsa slowly reduced their holdings in Cash/Deposits as allocation to

Fixed Income increased:

– Fixed Income allocation rose to 31% in 2009 from 29% in 2008 as HNWIs exercised some degree of caution and placed

greater emphasis on predictable income streams.

– Globally, equities accounted for 29% of total HNWI financial assets at the end of 2009, up from 25% a year earlier as

many of the world's stock markets recovered sharply.

• HNWIs increased their allocations to markets outside their home regions in search of higher returns

and geographic diversification of their portfolios:

– Europe, with a 6 percentage point growth, had largest the largest increase in allocations to markets outside the home

region, while for North America and Asia-Pacific the increase in allocations were 5 and 4 percentage points respectively.

• Looking forward to 2011, the trend of geographic distribution of assets is likely to continue while

allocations to Equities is expected to increase across regions


Spotlight


Key Findings – Changes in HNW Investor Psyche Post Crises• While financial markets have rebounded to a degree, HNWI clients have emerged more

cautious and conservative manner, yet are much more engaged in their financial affairs after the crises. However their investment decisions are driven much more from emotional than intellectual factors. – Trust has been regained to a degree in advisors and wealth management firms, but a large majority of

HNWIs have yet to regain trust in the regulatory bodies that were supposed to be monitoring the markets, which impacts the willingness to invest fully in the markets.

– HNWI investment decisions are now being driven much more emotionally than intellectually, with many investors not yet ready to take on the same risk as they did prior to the crises

– HNWIs are educating themselves about products, understanding disclosures, and investment risks before conferring with their advisors, and are seeking more specialized advice, greater transparency & simplicity and effective risk management capabilities from their wealth management firms.

Source: Capgemini Research 2010;


Despite the improved trust and confidence in Advisors and Firms, HNWIs have undergone major behavioral changes, which are likely to have long-term implications.Despite the improved trust and confidence in Advisors and Firms, HNWIs have undergone major behavioral changes, which are likely to have long-term implications.

While HNWI Clients have regained trust in their Advisors and Firms, their trust in Regulatory Bodies and Financial Markets has yet to recover fully

16%

23%

23%

25%

28%

25%

17%

15%

40%

20%

8%

7%

Somewhat AgreeAgreeStrongly Agree

48%

47%

67%

83%

4%

8%

7%

8%

5%

11%

17%

17%

2%

4%

5%

7%

Somewhat DisagreeDisagreeStrongly Disagree

23%

32%

29%

11%

Agreement of HNWI Clients ‘Losing Trust’ and Confidence in the Following Entities, 2008

Financial Advisor

Regulatory Bodies &

Institutions

Financial Markets

Wealth Management

Firm

9%

30%

25%

23%

8%

17%

25%

25%

6%

11%

Somewhat AgreeAgreeStrongly Agree

Financial Advisor

Regulatory Bodies &

Institutions

Financial Markets

Wealth Management

Firm

17%

47%

56%

59%

32%

18%

6%

4%

29%

14%

6%

8%

10%

4%

5%

4%

Somewhat DisagreeDisagreeStrongly Disagree

36%

16%

17%

71%

Agreement of HNWI Clients ‘Regaining Trust’ and Confidence in the Following Entities, 2009

Source: Capgemini/Merrill Lynch Client Survey 2010Note 1) Total for each category may not add to 100% as the percentage of respondents with neutral answers has been excludedNote 2) Survey asked, ‘To what extent do you agree or disagree with the following statements around your current base of HNWI and Ultra-HNWI clients?’ (Please rate each criterion on a scale of 1-7, 7 being extremely important and 1 being not at all important)


Passion Investments & Philanthropy


HNWI allocation to Luxury Collectibles grew to 30% in 2009, while allocation to Art Collections decreased to 22%


• Luxury collectibles market rebounded as jets, cars, and yachts saw an increase in demand again, particularly from Asia

• The Art market slowly returned to activity with successful art auctions in the latter part of 2009

• Allocation to Jewelry, Gems and Watches grew to 23% amidst inflation fears as cash flush HNWI bought more in this category

• Allocation to Other Collectibles (Wines, Antiques, Coins, etc.) grew to 14%:

• The Fine Wine Exchange, Live-ex 100 index, which tracks the price of 100 of the world’s best investment grade wines rose 15.7% during the whole of 2009

• Luxury collectibles market rebounded as jets, cars, and yachts saw an increase in demand again, particularly from Asia

• The Art market slowly returned to activity with successful art auctions in the latter part of 2009

• Allocation to Jewelry, Gems and Watches grew to 23% amidst inflation fears as cash flush HNWI bought more in this category

• Allocation to Other Collectibles (Wines, Antiques, Coins, etc.) grew to 14%:

• The Fine Wine Exchange, Live-ex 100 index, which tracks the price of 100 of the world’s best investment grade wines rose 15.7% during the whole of 2009

a “Miscellaneous” represents club memberships, travel, guns, musical instruments etc.b “Sports Investments” represents sports teams, sailing, race horses, etc.c “Other Collectibles” represents coins, wine, antiques, etc. d “Luxury Collectibles” represents automobiles, boats, jets, etc.e Survey Question: Please provide a representative PERCENTAGE breakdown of how your HNWI and UHNWI clients allocate their assets across Investments of Passion (IoP)Source: March 2010 Capgemini /Merrill Lynch Wealth Management Financial Advisor Survey; “Car Auctions bring in $122.6 million despite storms, recession” – Peter Corbett, The Arizona Republic, January 26, 2010;

HNWI Allocation to Passion Investments (%), 2006-2009

2006 2008 2009

26% 27% 30%

20%25% 22%

18%

22% 23%

14%

12% 14%6%

7%8%16%

7%3%

Luxury Collectiblesd

Art

Jewelry, Gems & Watches

Miscellaneousa

Sports Investmentsb

Other Collectiblesc

Pre-crisis


Art and Other Collectibles are most widely considered as another form of financial investment


• Art and “Other Collectibles” were the most popular categories which wealthy considered as other forms of financial investment:

• Nearly 30% of global HNWI are investing in Art for financial benefits, or as a Financial Asset.

• Europeans predominate in this area at 37.4% of HNWI considering Art as a Financial Asset.

• North America HNWI more widely consider Other Collectibles such as Wine, Antiques, Coins etc as another form of financial investments.

• Art and “Other Collectibles” were the most popular categories which wealthy considered as other forms of financial investment:

• Nearly 30% of global HNWI are investing in Art for financial benefits, or as a Financial Asset.

• Europeans predominate in this area at 37.4% of HNWI considering Art as a Financial Asset.

• North America HNWI more widely consider Other Collectibles such as Wine, Antiques, Coins etc as another form of financial investments.

a. Passion investments include the categories of Luxury Collectibles,Art Collections, Jewelry, Gems and Watches, Sports Investments and others ; b. Survey Question: Which categories among the following are considered by your HNWI clients as another form of investment (with the expectations of higher returns at a future sale)?Source: March 2010 Capgemini /Merrill Lynch Wealth Management Financial Advisor Survey; Robert Frank, “The Wealth Report: Flatt Wine Auction Reaps Nearly $1.2 Million at Sotheby’s”, March 22, 2010; Evelyn Wiese: “How to buy a sports team?” Worth – Grow Wealth Management

Categories that HNWIs Considered Another Form of Financial Investments (%), 2009

Sports in-vestments

Luxury col-lectibles

Jewelry, Gems, Watches

Other collectibles

Art

0% 5% 10% 15% 20% 25% 30%

5.0%

9.1%

14.4%

17.9%

29.8%

% of Respondents


• Towards the end of 2009, the market for collectibles such as Art, Wine and Luxury cars rebounded with successful auctions in Europe and North America:– While Art still remained a top category for UHNWI, the category overall experienced a slight decrease in

allocation from 25% to 22%, as prices for contemporary art dropped in 2009.

– Globally, HNWIs increased their allocation to Luxury Collectibles (yachts, cars, jets) by 3 percentage points over 2008.

• Art and Other Collectibles emerged as the most popular categories for High Net Worth Individuals investing for financial reasons.

• Continuing on the trend witnessed in 2008, HNWI spending on Health and Wellness continued to rise in 2009, while Luxury spending decreased:

• In 2009, as HNWIs increased their allocations to philanthropic activities, there was corresponding HNWI demand for Philanthropic offerings from their Wealth Management firms.

• Philanthropic giving is expected to grow across nearly all regions by 2010, except for North America, which has a mixed outlook.

Key Findings – Passion Investments and Philanthropy


HNWI spending on Health and Wellness saw a renewed increase in 2009 while that on luxury consumables decreased


• Continuing from 2008 trend, the Health and Wellness category (which includes activities such as high-end spa visits, fitness-equipment installations, and preventative medicine procedures) saw a further rise in the HNWI spending in 2009, with N. America and Asians spending the most

• Luxury and Experiential Travel saw an increase in spending, with the majority of increase coming from Asia and Latin America

• The overall sales of luxury goods globally declined 8% to about $227 billion in 2009, and correspondingly 28% of HNWI indicate they are spending less on the Luxury Consumables (designer bags, clothes, shoes,) category:

• While most markets remain cautious, spending on luxury consumables in countries such as China and India is on the rise.

• Continuing from 2008 trend, the Health and Wellness category (which includes activities such as high-end spa visits, fitness-equipment installations, and preventative medicine procedures) saw a further rise in the HNWI spending in 2009, with N. America and Asians spending the most

• Luxury and Experiential Travel saw an increase in spending, with the majority of increase coming from Asia and Latin America

• The overall sales of luxury goods globally declined 8% to about $227 billion in 2009, and correspondingly 28% of HNWI indicate they are spending less on the Luxury Consumables (designer bags, clothes, shoes,) category:

• While most markets remain cautious, spending on luxury consumables in countries such as China and India is on the rise.

a. Total for the chart will not add to 100% due to some % to Neutral choiceb. Survey Question: To what extent did your HNWI and UHNWI clients increase their spend on the following lifestyle categories over the last year?Source: March 2010 Capgemini /Merrill Lynch Wealth Management Financial Advisor Survey; Robert Frank, “The Wealth Report: Chinese are the new kings of blings”, October 13, 2009; Matthew

Vincent, “FT Wealth: A Return to luxury”, March 25, 2010

HNWIs Lifestyle Spending (%), 2009

6%

17%

22%

24%

19%

13%

23%

36%

3%

2%

5%

13%

Slightly IncreaseIncreaseSignificantly Increase

14%

18%

15%

2%

4%

9%

7%

0%

2%

1%

1%

Slightly Decrease

Decrease

Significantly Decrease

Health / Wellness

Other Spending

Luxury Consumables

Luxury Experiential

travel

73%

45%

30%

25%20%

28%

23%

2%


9%

27%

26%

26%

26%

9%

13%

16%

17%

23%

2%

3%

4%

5%

8%

Slightly HighHighExtremely High

In 2009, as HNWIs increased their allocations to philanthropic activities, there was significant demand for Philanthropic offerings

Note: Total for each philanthropic offering in the chart may not add to 100% as the percentage of respondents with Neutral answers have been excludeda. Survey Question: “How strong is HNWI client demand for the following philanthropy offerings? ”Source: March 2010 Capgemini/Merrill Lynch FA Survey

Client Demand for Specific Philanthropy Offerings (%), 2009

Wealth management firms may need to offer specialization around philanthropic offerings by building expertise in-house or leveraging third party ventures. Wealth management firms may need to offer specialization around philanthropic offerings by building expertise in-house or leveraging third party ventures.

Other Philanthropy

Offerings

Advice on Financial

planning and tax

Project and Organization

Selection

Monitoring and impact

assessment

Setting up a “giving” vehicle

57%

48%

46%

43%

20%

Regionally, HNWIs from North America

and Asia-Pacific expressed the highest demand for “Advice in financial tax planning”

3%

8%

6%

6%

4%

3%

7%

6%

7%

7%

14%

7%

7%

7%

5%

Slightly Low Low

Extremely Low

16%

20%

19%

22%

20%

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