The ultra-rich have seen their fortunes shrink by 10% in 2022, as their investment portfolios are hit by interest rate hikes, consequences of the war in Ukraine and inflation, but optimism is stake for this year, according to a study by the consulting firm Knight Frank.
The total wealth held by these “very wealthy” individuals, defined as owning at least $30 million (including the value of their primary residence), “decreased by 10% in 2022, a decline of about $10.1 trillion dollars”, details this study published on Wednesday.
“Last year, the Ukraine crisis fueled the European energy crisis and inflated already soaring inflation. As a result, 2022 has seen one of the steepest upward moves in interest rate history,” according to Liam Bailey, global head of research at Knight Frank.
Four in ten ultra-wealthy people have yet “seen their wealth increase in 2022”, but “the overwhelming trend was negative” which “is not surprising” because the rate hikes of several central banks to cope with inflation weigh on investment portfolios, explains the firm.
Europe saw the biggest decline, with a 17% decline in these fortunes, followed by Australasia (-11%) and the Americas (-10%). Africa and Asia, in comparison, suffered the smallest declines (-5% and -7% respectively).
“Exchange rates had a significant impact” as “dollar strength was unmatched, driven by the Federal Reserve’s unwavering commitment to one of the fastest rate hike cycles in history” , continues the report.
Yet, while “significant risks remain to the global economy” in 2023, “market sentiment will change rapidly” with “very real opportunities emerging in global real estate markets,” with the tipping point in interest rates expected this year, according to Liam Bailey.
According to the Knight Frank study, 69% of affluent investors expect to see their portfolio grow this year.