According to Tirumandyam (2012), high net worth individuals are worth investable assets of US$1 million or more, excluding primary residence, consumables, collectables, and consumer durables.
According to AIMA Canada (2004) high-net-worth individuals were the primary investors in hedge funds generating reasonable returns while protecting their capital, but the landscape is now changing with institutional investors increasing their allocations to hedge funds with alternative investment’s low correlation to traditional portfolios of cash, stocks and bonds.
In the Global Wealth Report by Shorrocks et. al (2012), it is shown that it requires a high degree of ingenuity to estimate the pattern of wealth holdings above USD 1 million because, at high wealth levels, the official statistics and sample surveys of wealth data become increasingly incomplete and unreliable.
The authors overcome this deficiency by exploiting well-known statistical regularities in the upper parts of the wealth distribution to guarantee that the top wealth tail is consistent with the annual Forbes tally of global billionaires and similar “rich list” data published elsewhere. This ensures credible estimations of the global pattern of asset holdings in the high net worth (HNW) category from USD 1 million to USD 50 million, and in the ultra-high net worth (UHNW) range from USD 50 million upwards.
HNW and UHNW individuals are concentrated in particular regions and countries with a similar lifestyle, even when they reside on different continents, while the base of the wealth pyramid is occupied by people from all countries of the world at various stages of their life cycles.
The wealth portfolios of individuals dominated by financial assets and equity holdings in public companies traded in international markets are also likely to be similar. Thus, the official exchange rates to value assets are more applicable than using local price levels.
It is estimated that there were about 28.5 million HNW individuals with wealth between USD 1 million and USD 50 million in mid-2012, of whom the vast majority (25.6 million) fall in the USD 1–5 million range. The results of their study show that Europe overtook North America, one year ago, as the region with the greatest number of HNW individuals, but tradition has been restored this year with 9.2 million (32%) in Europe and 11.8 million residents (42% of the total) in North America. They also estimated that there are currently a fraction of one million HNW individuals in China (3.4% of the global total), and Asia-Pacific countries. Excluding China and India, which have 5.7 million members (20%), and 2.6% of the total, the remaining 753,000 HNW individuals reside in India, Africa or Latin America.
Their estimations suggest that worldwide there are 84,500 UHNW individuals, with net assets exceeding USD 50 million, where 29,300 are worth at least USD 100 million and 2,700 have assets above USD 500 million.
North America dominates the regional rankings with 47% (40,000 UHNW residents), while Europe has 26% (22,000 individuals) and 15% (12,800) reside in Asia-Pacific countries, excluding India and China, but the recent fortunes created in China have propelled it into second place with 4,700 representatives. Followed by Germany (4,000), Japan (3,400), the United Kingdom (3,200) and Switzerland (3,050).
AIMA Canada, 2004, “Hedge Fund Primer”
Shorrocks, A., Davies, J. and Lluberas, R. (2012), “Global Wealth Report”, Credit Suisse AG- Research Institute
Tirumandyam, P., 2012, “Evolving Demands on the Hedge Fund Administration Industry”, Capgemini