Real estate represented the largest investment allocation made by HNWIs with a 23% allocation among all asset classes, in contrast to the rest of the world (19.5%).
The Asian preference to hold physical assets such as property instead of stocks and bonds could be one reason for the highest allocation to real estate, along with the optimistic outlook over the region’s economic growth.
“While equity market performance across Asia Pacific was mixed in 2013, strong economic growth and real estate prices in key markets drove healthy overall growth,” said George Lewis, group head, RBC Wealth Management and RBC Insurance.
Following real estate, the Asian preference was for stocks and bonds with 21.7% and 18.2% allocation, respectively.
The report highlighted that HNWIs in Asia Pacific (excluding Japan) have a greater amount of trust and confidence in the wealth management industry (85.5%) compared to HNWI in the rest of the world (79.4%).
As a result, Asian investors have a greater focus on wealth growth (41%) than preservation (31%).
In seeking growth, they have significantly increased allocation to foreign assets, with Europe attracting the largest share followed by North America.
Outlining country specific trends, the report said Japan’s HNWIs increased allocation to alternative investments to 12.4% in 2014 from 7% in 2013. This was driven primarily by allocation to foreign currency.
Prime Minister Shinzo Abe’s structural reforms to spark economic growth caused HNWIs to reassess the risk/return profiles of various investments, the report said.
Despite a decrease in cash allocation by 5.6% to 43.8%, Japan’s wealthy investors still had the highest cash positions globally, the report noted.
Cultural differences
There were some differences in asset allocation between Hong Kong and Singapore HNWIs, reflecting the cultural differences. Singapore’s wealthy investors had a higher allocation to cash (27.1%) as compared to their Hong Kong counterparts (23.8%).
Hong Kong’s HNWIs had allocated higher in fixed income securities (18%) compared to Singapore counterparts (12.5%).
Allocation to equity investments by Hong Kong and Singapore wealthy individuals were very close, 22.4% and 23.1%, respectively.
Asia wealth set to expand
The report forecasts that Asia Pacific will continue to lead global growth and surpass North America as the region with the highest HNWI population by the end of 2014 – and the largest amount of private wealth by 2015.
The growth in wealth from 2013 to 2016 is being driven by China, India, Indonesia and Thailand.
Year on year, the population of HNWIs in the region in 2013 increased by 17.3% to 4.3 million, while their wealth grew by 18.2% to reach $14.2trn, led by Japan and China, which collectively hold two-thirds of Asia-Pacific’s population.
Superior returns in Japanese equity markets pushed up the population of wealthy individuals in the country by 22.3%
Taiwan was another market to experience a huge rate of HNWI population growth in 2013 (17.4%) compared to a year earlier, and also on the basis of five-year compounded annual growth rate.
Hong Kong and India meanwhile did not fare well in 2013 due to the weaker equity market performance, the report said.
