Latam wealth: Latin America has a valuable new export for the global economy: wealth preservation. Millionaires in the US, Europe and Asia lost more than 20 per cent of their net worth last year. But Latin America’s rich are down just 6 per cent, according to a closely watched annual analysis released by Merrill Lynch and Capgemini on Wednesday. It suggests that John has a lot to learn from Juan on staying rich.
Bad investments are what clobbered most of the world’s high-net-worth individuals. North Americans ploughed more than a third of their money into equities, or nine percentage points more than the average allocation globally. Asians bet excessively on real estate. So did the Gulf’s petro-wealth, which also piled into hedge funds, private equity and structured products more than their well-heeled counterparts elsewhere.
With 40 per cent of their assets invested in fixed income, Latin Americans proved far more conservative with their treasure. They were also at or near the bottom in their allocations to equities and real estate. The prosperous elite repatriated their wealth in droves around the world last year but no group more so than Latin Americans, who capitalised on government-led subsidies and relatively higher interest rates.
The region seems to prefer the gamble in the process of making money rather than investing it once it’s made. Countries in Latin America are typically fraught with more political and business risks than North America or Europe. But bountiful commodities have afforded the creation of wealth, as have entrepreneurial endeavours in sectors such as retail, where barriers to entry still exist for multi-national rivals.
The more prudent investment philosophy from the Southern Hemisphere suggests a degree of admirable restraint where greed is concerned. They don’t seem terribly eager to turn $10 million made from business into $50 million through market wagers-a pursuit that generally requires not just cojones but leverage.
Latin America’s richest are nevertheless expected by Merrill to boost their wealth by nearly 7 per centby 2013, on a par with Americans, and ahead of Europeans and Middle Easterners. But they’ll do it the old-fashioned way – and from a stronger start having lost so much less.