Cape Town - The wealth of the world's richest people is likely to have increased by 11% to $37 trillion (€27 trillion), last year, as high net worth individuals shrug off concerns over the global economy.
The annual World Wealth Report, published by Merrill Lynch and Capgemini, will confirm the precise figure this week. But Financial News has calculated that the sharp rise in asset values last year will have produced an increase of this order, which is 37% higher than the annual 8% growth rate achieved over previous years.
The $37 trillion figure is 40% higher than the gross domestic product of the G8 nations put together and equivalent to $5 800 (R41 442.49) for every person on the planet.
The growth in combined wealth of high net worth individuals is the result of rising asset values and surging levels of capital markets activity in recent years.
Announced mergers and acquisitions in Europe for this year has nearly doubled from 2006 to reach $1.3 trillion, according to data provider Thomson Financial. European companies have raised $51bn in more than 100 flotations this year, the fastest pace since the dotcom boom.
Millions for investment banks
This has made millions for staff at investment banks, as well as their clients, and fuelled the rise of the hedge fund, private equity and real estate industries. Last week's flotation of Blackstone Group, raised $7.7bn, making billionaires of its founders.
The private equity group has set up an equity incentive plan for senior staff worth $5.1bn, with a further $1.1bn in stock for more junior employees.
Cerulli, a research firm, last week said the global asset management industry looked after $48 trillion in December, a 13.7% rise over the previous 12 months. Citi and UK-based estate agent Knight Frank recently disclosed that prime residential property rose in value globally by 14%. The S&P 500 index has risen 6.6% this year.
The wealth of the richest people would have been greater but has been dragged down by less impressive returns from hedge funds and cash.
According to a survey published last week by PwC, the chief executives of wealth management firms are "staggeringly optimistic about growth". They expect their assets under management to rise by 23% a year by 2010. Asia is set to lead the way with a rise of 34%.
Clamouring for customers
Such is the scale of wealth in the hands of individuals such as Lakshmi Mittal - the steel magnate and architect of Europe's biggest completed takeover last year - that investment banks are clamouring to convert wealthy individuals into private banking customers. They are offering them products that used to be reserved for corporate clients.
From infrastructure funds, through Chinese private equity to clean technology, investment banks are pointing their best ideas in the direction of the growing wealthy minority.
Securities analyst Christopher Wheeler of Bear Stearns said: "We believe wealth management is the fastest-growing segment of the financial services industry."
However, there are fears the growth may come to an end if the global economy stumbles over the next few months. Rising bond yields have led to fears about a rise in inflation. Private banks are struggling to hire advisers sufficiently experienced to handle wealthy clients.
Meanwhile, the boost in leveraged debt that comes with few conditions attached by their borrowers, known as covenant-lite loans, has prompted concern that if there is a sudden drop in asset values, it could precipitate a wider collapse.
John Winter, head of European investment banking and debt capital markets at Barclays Capital, said: "Market sentiment does not feel like it can get much better but that does not mean it all has to end in tears."