Merrill Lynch and Capgemini Release 12th Annual World Wealth Report

Business Wire, June 24, 2008

define HNWIs' asset allocation strategies. Building on the optimism of 2006, the early months of 2007 showed HNWIs betting heavily on riskier asset classes. But as the year wore on, and financial market turmoil and economic uncertainty intensified, HNWIs began to retrench, shifting their investments to safer, less volatile asset classes.

The Report found that cash/deposits and fixed income securities accounted for 44 percent of HNWI financial assets, up 9 percentage points from 2006. Fixed income securities saw a 6 percentage point increase in asset allocation, accounting for 27 percent of holdings, up from 21 percent in 2006.

Globally, HNWIs continued to decrease their holdings in North America and showed greater interest in domestic market investments, preferring more familiar ground amid heightened levels of economic uncertainty.

Green Investing Gains Traction

Due to overall heightened interest in the environment, green investing has become widely popular across the globe in recent years, offering investors lucrative returns and an opportunity to become actively involved in social responsibility. An array of vehicles through which to back green initiatives drove robust growth in green sectors in 2007, such as mutual funds, ETFs and other pooled products, or alternative investments. The total investment in clean technology, for example, increased to US$117 billion in 2007, up 41 percent from 2005, with notable strength in wind and solar segments.

The Middle East and Europe were the most environmentally attuned HNWI and Ultra-HNWI populations, with participation ranging from around 17 percent to 21 percent in 2007. In comparison, only 5 percent of HNWIs and 7 percent of Ultra-HNWIs in North America allocated part of their portfolio holdings to green investing. North America was also the only region in which social responsibility was the primary driver of HNWIs' green investing. Among HNWIs worldwide, approximately half pointed to financial returns as the primary reason for their allocation to green investing.

With future sustainability at stake, the Report projects continued growth in green investments.

Looking Ahead

Despite heightened uncertainty regarding the near-term global outlook, still-strong fundamentals in emerging markets are likely to sustain high levels of growth. The balance between emerging market strength and mature market recovery will likely persist through 2008, with the short-term outlook subject to variability given that aspects of potential risk may still be unknown.

By and large, the global economy has two distinctive obstacles to overcome: inhibitors to growth in mature markets and high risks of inflation in emerging markets. How well these challenges are met will shape global HNWI growth prospects going forward. Given 2007 performances and taking into consideration recent developments in world markets, the Report suggests that global HNWI wealth will grow to US$59.1 trillion by 2012, advancing at a rate of 7.7 percent per year.

Gain even greater insight into the complexity and competitiveness of the global wealth management market with the recently released book "WEALTH: How the World's High-Net-Worth Grow, Sustain, and Manage Their Fortunes" by Merrill Lynch and Capgemini at www.wealththebook.com .