Amid COVID-19, global financial wealth soars to a record high, Romanian financial wealth rises 9%
Global financial wealth reached a new high in 2020, rising 8.3%, as strong stock market performance and a spike in household savings fueled a wealth boom amid the COVID-19 pandemic, according to a new report by Boston Consulting Group (BCG).
That development is in stark contrast to the impact of recent global crises: during the 2008 subprime crisis global financial wealth declined 7.8% and it stagnated when the dotcom stock market bubble burst in 2002.
The financial wealth of Romanians increased 9% last year on 2019, calculated at constant currency, faster than Western Europe’s 4% rise, but slower than the 12% gain in Eastern Europe, which also includes the Baltics and Russia, BCG said, based on its freshly published Global Wealth Report.
“Wealth concentration in Romania shows a less polarized society than elsewhere in Eastern Europe. A strong segment of people, who own less than 250k USD, accounts for 58% of total financial wealth,” said Nimrod Pais, BCG Managing Director and Partner. “At the same time, the share of those with over 100m USD net worth is higher than globally: 16% versus 13%, but that rate is only half of the 32% Eastern European average,” Pais added.
Romanian asset allocation is characterized by a strong growth in life insurance and pensions, and the share of equities is much lower than globally, or elsewhere in Eastern Europe, the data show. The share of cash and deposits is well below the Eastern European average, but it still lags the global averages, which reflects a slightly more advanced savings market than at Romania’s Eastern European peers, Pais said.
The report, titled Global Wealth 2021: When Clients Take the Lead, reveals that many wealth management clients in 2020 embraced alternative investments in their quest for higher returns, shifting away from low-yield debt securities. As part of this trend, real assets, led primarily by real estate ownership, reached an all-time high of $235 trillion. Still, Asia, which has the largest concentration of wealth in real assets ($84 trillion, 64% of the regional total) will see financial asset growth exceed real asset growth (7.9% versus 6.7%) in the coming years. Asian investment funds, except for Japan, will become the fastest-growing financial asset class, with a projected compound annual growth rate (CAGR) of 11.6% through 2025.
According to the report, North America, Asia (excluding Japan), and Western Europe will be the leading generators of financial wealth globally, accounting for 87% of new financial wealth growth worldwide between now and 2025. BCG forecasts that due to Asia’s massive financial growth, Hong Kong will replace Switzerland by 2023 as the market leader for managing cross-border wealth.
As for Romania, BCG forecasts that the financial wealth segments remain stable here in the next five years, with a slow growth of the richest quintile and a very slow decrease of the segment with wealth below 250k USD.