The world's high-net-worth population is skyrocketing, pointing to asset management opportunity here and abroad - particularly in Asia.
The rebounding economy in Asia and booming markets elsewhere helped add a million investors last year to the high-net-worth club - those with $1 million or more of investable assets - according to the Merrill Lynch/Gemini Consulting World Wealth Report. Assets held by these investors rose 18% globally in 1999, to $25.5 trillion, the report said, with those in North America and Europe accounting for $8.1 trillion and $6.7 trillion, respectively. The report, issued May 1, estimates that global wealth in this category could reach $44.9 trillion by 2004.
While the U.S. stock market gained 29.5% last year, Asian markets grew 70%, said Andrew Chan, a marketing and sales director for the Asian-Pacific market at Merrill Lynch & Co.
"Whenever there is a market push, investors and investments increase. But this is definitely a significant Asian push that will be watched closely by American financial businesses," Mr. Chan said. According to the report, investable assets held by high-net-worth investors in Asia rose 23%, to $5.4 trillion, in 1999.
Citigroup Inc. just joined a growing number of U.S. institutions that are beefing up their capabilities in Asia, announcing on Saturday that it is teaming up with Fubon Group of Taiwan.
Citi will invest $750 million in five financial services businesses: Fubon Insurance, Fubon Securities, Fubon Commercial Bank, Fubon Asset Management, and Fubon Life Assurance. Citigroup will be Fubon's partner in property and casualty insurance, life insurance, banking, securities, and asset management and have a seat on the board of all five companies.
Citigroup chairman and CEO Sanford I. Weill said, "This partnership creates a venture positioned for leadership and growth in one of Asia's most attractive markets, linking our own local presence and global capabilities with Fubon's premier brand name."
Katy Wallbrink, Merrill Lynch's director of international private wealth services, said the market has been fruitful for the company. It entered Asia in July 1998 and its assets under management there have risen to $25 billion.
And Merrill Lynch was able to gain a competitive advantage over other American investment companies last month when it joined forces with HSBC to create a global online banking and investment service, Mr. Chan said.
He said American financial investment companies are eager to go East. Those already there include Goldman Sachs, Putnam Investments, Alliance Capital Management, Massachusetts Financial Services, and J.P. Morgan. But it may be difficult for newcomers now that Japanese banks are working harder at maintaining clients in a stronger economy.
Mr. Chan said a strong local market is no guarantee of a corresponding increase in high-net-worth investors. In Argentina and Brazil, local stock markets increased 85% and 42.7% respectively, but the wealth of high-net-worth investors rose only 14%.
But the East's affluent-market population explosion was not produced solely by a market surge; there was also a return to normalcy after the slump Asia endured in 1997, Mr. Chan said. "Astute investors stayed wealthy through the crisis by investing venture capital outside of Asia. From there, the rich got richer."
Not everyone paints a rosy picture for U.S. companies. A lot of banks and other financial services companies have made a stab in Asia in recent years, but simply setting up shop there does not ensure success, said Ben Phillips, an analyst with Cerulli Associates of Boston.
In April, Chase Manhattan Corp. liquidated emerging-markets funds and closed asset management operations in Hong Kong and Japan. Chase said at the time that it could not keep up with banks based in Japan.
"American banks have a tough time breaking into this market. You are dealing with tough competition," Mr. Phillips said. "If they want to compete, they have to be able to give products and services that appeal to Japanese clientele. They have to give them something they can't get at a normal banking center."