Global Economy Hits Home for UHNW Investors

Risks to the global economy have high net worth investors here at home reevaluating their investment strategies, according to the latest research from Millionaire Corner, that shows the wealthy are thinking twice about international investment.

A mild recession in Europe threatens global economic growth, according to the International Monetary Fund, which last week lowered its 2012 growth forecast to 3.25 percent. The revision is down from the 4 percent global growth rate forecast by the IMF last April.

“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere,” said the IMF in its January 2012 World Economic Outlook Update. “Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated.”

The fallout from Europe’s debt crisis led to slower than expected growth in emerging and developing countries, and the effects are expected to spread to the United States, as well. The IMF projects that in 2012 the U.S. will maintain the weak 1.8 percent growth rate achieved in 2011 and that growth will not surpass 2 percent until 2013 when it edges up to 2.2 percent. Growth forecasts for emerging and developing economies has been revised downward to 5.75 percent, said the IMF, “a significant slowdown" from the 6.75 percent growth registered during 2010 and 2011.

More affluent U.S. investors appear most sensitive to these global factors. Nearly three-fourths (72 percent) of Ultra High Net Worth investors – those with $5 million to $25 million - say the European debt crisis has affected or will affect the way they invest, according to a fourth quarter study by Millionaire Corner. In contrast, non-millionaire investors – those with $100,000 up to $1 million – are less likely to modify their investment strategies in response to the global economy. Fifty-seven percent indicate they will change their investment behavior as a result of the euro zone crisis.

The global economy appears to be discouraging rather than encouraging the Ultra High Net Worth to investment internationally. A greater share appears to be closing off to international investment opportunities. While 35 percent said they were likely to invest internationally in 2012, a larger percentage – 44 percent – said they had no interest in international investments, according to our fourth quarter study. Those who expressed interest in international investments see the most opportunity in China, Brazil and Canada.

A high level of concern over the global economy was also reflected in our monthly investor survey for January. Millionaires identified “international concerns” as the second biggest obstacle to obtaining the American Dream. The global economy ranked second in concern only to the current political climate at home.