Billionaire offspring are gravitating towards the world economy's grand opportunities and challenges, investing in fields like clean energy and artificial intelligence, as per a Swiss bank report released last Thursday.
The report indicates that this trend is picking up steam due to the impending transfer of over $5.2 trillion in wealth, with more than 1,000 billionaires estimated to pass down their fortunes to their children in the next two decades.
UBS, representing half of the world's billionaires, discovered that 150.8 billion US dollars were inherited by 150 heirs in the past year, surpassing the 140.7 billion US dollars amassed by 84 self-made billionaires during the same period.
Globally, the number of billionaires increased by 7% to 2,544, with a total wealth of 12 trillion US dollars, marking a 9% growth in value despite excluding inflation. The total remains below the 13.4 trillion US dollar high achieved in 2021, when the world pool of billionaires expanded by 959 to 2,686, boosted by inflated asset values such as stocks and real estate during the pandemic.
The report highlights the challenging state of the IPO market in 2022 and 2023, which has limited entrepreneurs' ability to take their companies public and consequently increase their wealth. Max Kunkel, Chief Investment Officer for Family and Institutional Wealth Management Clients at UBS, mentioned that recent economic, geopolitical, and political uncertainties have complicated the creation of business wealth.
Europe led the rise in billionaire wealth due to a post-pandemic buying frenzy boosting the earnings and stock prices of leading luxury goods companies, thereby benefiting the billionaire families behind them. LVMH chairman Bernard Arnault and his five children are among the top European beneficiaries, with Arnault ranked third worldwide in wealth with a net value of 167 billion US dollars, according to Bloomberg Billionaires Index.
While tech and healthcare billionaires have accumulated vast fortunes over the past decade, the report reveals early signs of improved performances for industrial billionaires, such as Reliance Industries' Mukesh Ambani and India's top towers behind Adani Group and others.
Estate planning and associated risks and advantages are set to pose a significant challenge for UBS as the wealth transfer process gains momentum. Cavalli emphasized that the transfer will result in either substantial gains or losses depending on the bankers' understanding of the potential risks and opportunities involved.
The report shows that philanthropic goals rank low on the priority list for most heirs, with only a third super rich next generation considering them as a major focus compared to half of the first generation. Impact investing, which contributes positively to society or the environment, is favored by younger beneficiaries over traditional charity practices, where the patriarchs of the past often donated to their preferred causes.
Charlie Munger, known for his charitable contributions, passed away at 99 years old on Tuesday. As per a public filing, he donated 40 million US dollars in Berkshire Hathaway stocks to the Henry E. Huntington Library and Art Gallery in October 2022.
Innovative frigate ship, Yara Eyde, will use only clean energy sources from 2026, showcasing the role of billionaire investments in driving technological innovation towards sustainability.
Enrichment Data:
- Billionaire heirs like Jeff Bezos from tech-savvy families are significantly affecting global markets, particularly in sectors like clean energy and artificial intelligence.
- Bezos Earth Fund, founded by Jeff Bezos, has committed $10 billion towards fighting climate change and supporting sustainable initiatives by 2030.
- Tech giants like Meta, Alphabet, and Microsoft have made substantial investments in AI, and their combined spending is expected to reach $200 billion by 2025.
- Nvidia co-founder Jensen Huang has seen his fortune grow to 121 billion US dollars due to the company's success in the AI market.
- Strategy: Billionaire heirs employ advanced estate planning techniques to minimize taxes and maximize philanthropic efforts' impact.
- Financial education is a major focus for many billionaires who aim to prepare their heirs for managing their inheritances responsibly.
Source:
