The investment portfolios of the very wealthy have been hit by interest rate hikes amid war in Ukraine and inflation, according to a study by consulting firm Knight Frank released on Wednesday.
Small blow to the wallet for the ultra-rich. In 2022, they saw their fortunes melt by 10%, as their investment portfolios were hit by interest rate hikes, according to a study by consultancy firm Knight Frank published on Wednesday. A consequence of the war in Ukraine and inflation but optimism remains in order for this year, underline the authors. The rich should get back together.
The total wealth held by these people “very wealthy”, defined as owning at least $30 million (including the value of their principal residence), “Dropped 10% in 2022, a decline of approximately $10.1 trillion,” details the study. “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.
Expected portfolio growth
Yet four out of ten very wealthy people have “seen their wealth increase in 2022”, more “the overwhelming trend was negative.” What “is not surprising” because the rate hikes of several central banks to cope with inflation are weighing on investment portfolios, details 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 have had a significant impact,” while “The strength of the dollar was unmatched, driven by the Federal Reserve’s unwavering commitment to one of the fastest rate hike cycles in history,” continues the report.
Yet, if “significant risks remain for the global economy” in 2023, “market sentiment will change quickly” 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.