PBI has drawn on WealthInsight’s research to analyse a specific industry which plays a major part in driving high-net-worth wealth creation. This month PBI looked at diversification in Turkey, Russia, Singapore, Mexico, and India.
Setting and maintaining strategic asset allocation is the core ingredient to long-term investment success, especially in times of volatility.
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By definition, ‘to diversify’ means to invest in a variety of assets to reduce risk. Even if not an easy task, diversification can help investors identify the appropriate level of risk of their financial goals and tolerance for portfolio volatility.
According to latest market figures, after the economic downturn diversification still helped containing portfolio losses, but the benefit was lower than before the market decline.
As of June 30, there were 696 diversified industry issuers listed on the Toronto Stock Exchange and TSX Venture Exchange, collecting a total market cap of $1.9 trillion.
Diversified industry sectors include a broad range of companies in consumer and industrial products and services (manufacturing, infrastructure, transport, commercial services, consumer products and services), financial services (banks, trading and investment banks, asset managers, insurance companies and other providers of financial services), real estate, communications and media.
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By GlobalDataDiversification has been performing inconsistently post-crisis. Although hit by the financial crisis, it remains a profitable sector for HNW wealth creation especially in emerging markets.
Key geographies
Countries with a well-structured financial system, a low- risk business environment, low tax rates, and a widespread range of profitable industries, are a hub for investors in the diversified industry.
It is the reason for which Turkish UHNWIs have acquired their wealth. WealthInsight reported Turkish UHNWIs’ volumes rising by 25%from 2007 to 2012. This reflects the nature of local companies with a large proportion of Turkish companies covering more than one core industry, the report said.
| Name | Wealth (US$bn) | Sector | City o Residence |
|---|---|---|---|
| Mehmet Emin Karamehmet | 4.2 | Diversified | n/a |
| Mr. Ahmet Çalik | 4.1 | Diversified | Istanbul |
| Mr. Ferit Faik Sahenk | 3.4 | Diversified | n/a |
The Diversified industry, in second place, is the primary source of wealth for 11.3% of Russia‘s UHNWIs. As with UHNWIs, diversified is also the second most important industry from which Russia’s billionaires have acquired their wealth – it is the primary source of wealth for 16% of Russia’s billionaires.
According to recent reports from the European bank for reconstruction and development (EBRD), Russia has been engaging – however with poor results- in diversifying its economy avoiding to over-rely on its well established oil and gas and commodities markets.
| Name | Wealth (US$bn) | Sector | City o Residence |
|---|---|---|---|
| Mikhail Prokhorov | 18 | Diversified | Moscow |
| Vladimir Potanin | 17.8 | Diversified | Moscow |
| Mikhail Fridman | 15.1 | Diversified | Moscow |
In Singapore, diversified industries remained in second place as the primary source of wealth for 9.4% of HNWIs. According to the last WealthInsight’s report, HNWIs who acquired their wealth from diversified industries performed well, with their volumes increasing by an impressive 116% between 2007 and 2012. Also, together with real estate, energy and utilities, tech and telecommunication, diversified accounted for significantly higher proportions of Singapore UHNWIs.
| Name | Wealth (US$bn) | Sector | City o Residence |
|---|---|---|---|
| Robert Chee Siong Ng | 3.7 | Diversified | Singapore |
| Peter Eng Hock Lim | 1.9 | Diversified | Singapore |
| Dr. Bhupendra Kumar Modi | 1.05 | Diversified | Singapore |
In 2012, the diversified industry accounted for 9.1% of Mexican UHNWIs. In 2013, Mexico saw a dramatic rise in the diversification of investment destinations, especially in the renewable and clean energy and mining sector. Nevertheless, WealthInsight’s research suggests that newly minted Mexican millionaires, particularly entrepreneurs, are more likely to have high business interests and would not yet necessarily have diversified their portfolios. WealthInsight expects the business interests of HNWIs in Mexico to further increase to 17.6% by 2017.
| Name | Wealth (US$bn) | Sector | City o Residence |
|---|---|---|---|
| Mr. Carlos Slim Helú | Diversified | n/a | |
| Mr. German Larrea Mota Velasco | 15.2 | Diversified | Mexico City |
| Mr. Ricardo Benjamín Salinas Pliego | 10.5 | Diversified | Mexico City |
Diversified was the primary source of wealth for 8.5% of local Indian UHNWIs in 2012, reports WealthInsight. In 2012, 8.5% of Indian UHNWIs have made their fortunes in diversified industries, with the industry expected to grow 7% by 2015.
| Name | Wealth (US$bn) | Sector | City o Residence |
|---|---|---|---|
| Mr. Mukesh Dhirubhai Ambani | 23.8 | Diversified | Mumbai |
| Dr. Azim Hashim Premji | 16.4 | Diversified | Bengaluru |
| Mr. Ravikant Nand Kishore Ruia | 8.5 | Diversified | n/a |
