The ultra-rich invest their wealth in ultra-exclusive assets

More money, different problems

High net worth individuals not only have much more money, but they invest in a completely different world of assets.

“The very rich,” wrote American author F. Scott Fitzgerald, “are different from you and me.” His friend Ernest Hemingway is often said to have replied “Yes, they have more money.”

They also have different problems, according to the latest study of Ultra High Net Worth Individuals (UHNWI) – those with a net worth of more than US$30 million – by property firm Knight Frank.

Knight Frank’s Wealth Report 2015 Attitudes Survey reports on issues UHNWIs think could affect their wealth, lifestyles or business. Family and business succession issues top the list, followed by potential increases in wealth tax, increased government scrutiny, cybercrime and political interference.

The Russian ultra-rich worry particularly about Russian politics and the conflict in Ukraine: fully one-third are thinking about leaving Russia, compared to just 4 per cent of Australian and New Zealander UNHWIs who are thinking of living elsewhere. Australasians also worry least about increased government scrutiny.

Related article: High net worth individuals have clear investment philosophies as well as deep pockets 

So where are UHNWIs putting their money? As well as fine art (see “Art Market Booms” at right), Asian UHNWIs, at least, are developing an interest in wine-making real estate. Forty per cent of survey respondents with clients in China noted a rising interest in vineyards, as did 43 per cent in Taiwan and 31 per cent in Malaysia.

Art auction turnover for Andy Warhol and Pablo Picasso

UHNWIs are not always where you might think: New Zealand, the UK and parts of Scandinavia all have more UHNWIs per million people than the US. And putting aside the enduring ultra-rich haven Monaco, some of the fastest UHNWI growth is coming in countries like Vietnam, Kazakhstan, Mongolia and Iran.

For UHNWIs, art is “the luxury asset where interest is rising the most” states the Knight Frank Wealth Report 2015 Attitudes Survey. That interest seems to be reflected in prices: global art auction turnover hit a new high in 2014, according to the latest study from Artprice. At US$15.2 billion, it was up 26 per cent on its 2013 level and back above the old 2007 peak.

The top art bidding market? China, which Artprice describes as having “the largest market for Old Masters in the world”. Despite Christie’s setting up shop in Shanghai and Sotheby’s in Beijing, Chinese turnover fell 5 per cent compared with 2013. But the US bounced back in 2014 with total auction turnover growth of 21 per cent, and the UK was up 35 per cent.

The art market has continued soaring in 2015, with the New York Times reporting that in February a Qatari buyer paid more than US$300 million for a Gauguin. Artprice predicts that “before long we will cross the billion-dollar threshold” for a single piece of art.

By artist turnover in 2014, Andy Warhol (US$569 million) led from Pablo Picasso (US$375 million), followed by Francis Bacon, Gerhard Richter, Mark Rothko and Claude Monet. Two Chinese artists made the top 10: watercolourist Qi Baishi and the versatile Zhang Daqian.

This article is from the May 2015 issue of INTHEBLACK

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