New billionaire heirs overtake self-appointed ones as $5.2 trillion wealth transfer begins

London CNN –

The billionaires created last year have amassed more wealth through inheritance than through entrepreneurship for the first time since UBS began tracking wealth one of the richest people in the world almost a decade ago.

And billionaire heirs are more likely than their parents to focus on the global economy’s big opportunities and challenges, investing in sectors such as clean energy and artificial intelligence, the Swiss lender said in a report Thursday.

“The large transfer of wealth is gaining significant momentum as many billionaire entrepreneurs get older,” says Benjamin Cavalli, who looks after strategic clients in the region UBS’s global asset management unit told reporters.

“This is an issue we expect to become even more common over the next 20 years, with more than 1,000 billionaires passing an estimated $5.2 trillion to their children.”

UBS (UBS), which counts half of the world’s billionaires among its clients, found that 53 heirs inherited $150.8 billion in the 12 months to April, up from $140.7 billion is that 84 new self-made billionaires have accumulated during this period.

Overall, the number of billionaires worldwide rose by 7% to 2,544. Their total wealth rose 9% to $12 trillion before accounting for inflation.

That’s the total remains below the peak of $13.4 trillion reached in 2021, when the global billionaire community grew to 2,686 people following a post-pandemic rebound in assets such as stocks and real estate.

The report’s findings also reflect the subdued situation IPO market until 2022 and early 2023, which limited the opportunities for entrepreneurs to take their companies public and thus increased their wealth.

Bernard Arnault of LVMH pictured in Paris with his wife Helene and four of his five children, from left: Frederic, Delphine, Antoine and Alexandre.  All five of his children work in the company.

For the first time, Europe led the growth in billionaire wealth as a “post-pandemic shopping spree” boosted profits and share prices of leading luxury goods companies based in France, benefiting the billionaire families behind them, the report said.

These include LVMH Chairman Bernard Arnault and his five children. According to the Bloomberg Billionaires Index, Arnault is the third richest man in the world with a net worth of $167 billion. Arnault’s wealth late last year surpassed that of Tesla’s Elon Musk and Amazon’s Jeff Bezos, who hold the first and second spots respectively.

While technology and healthcare billionaires have amassed the most wealth in the last decade, the report pointed out “First signs of improvement” from industrial billionaires, including India’s Gautam Adani, who is behind the multinational conglomerate Adani Group, and Mukesh Ambani of Reliance Industries.

“This could continue given government incentives in several countries to support energy transition and increased defense spending,” the report said.

Risks and opportunities for UBS

The “shocking” transfer of wealth to younger generations represents a huge opportunity for UBS, but also poses significant risks, according to Cavalli.

“You can either be on the winning or receiving end, or … lose significant assets over time if you don’t know the potential beneficiaries,” he said.

Typically younger customers They would rather have another banker than their parents, although not necessarily a younger one, Cavalli said, pointing out that many heirs are over 50 themselves.

After rescuing failing rival Credit Suisse in March, UBS is now the world's second-largest asset manager - behind only Morgan Stanley - with nearly $5.4 trillion in assets under management.

The changing of the guard could also impact charitable giving: According to the UBS report, less than a third of descendants view philanthropy as one of their main goals, compared to two-thirds of first-generation billionaires.

Heirs are more inclined towards impact investing – i.e. socially or ecologically beneficial investments – about “classic philanthropic donations,” Cavalli said. “The Patriarchs have historically been known to write checks for causes for which they personally had an affinity and passion.”

Billionaire investor Charlie Munger, who died Tuesday at age 99, was known for his charitable donations. For example, in October, he donated Berkshire Hathaway stock worth $40 million at the time to the Henry E. Huntington Library and Art Gallery, according to a regulatory filing.