Majority of billionaires accumulated wealth last year through inheritance

More than 50 heirs globally inherited $150.8 billion over the past 12 months, UBS report says

More than 1,000 billionaire entrepreneurs are expected to pass an estimated $5.2 trillion to their children over the next 20 to 30 years, UBS says. Getty Images

A majority of billionaires who accumulated wealth over the past year inherited their fortunes rather than earning it through entrepreneurship, according to a report by Swiss banking group UBS.

A total of $150.8 billion was inherited by 53 heirs over the past 12 months, exceeding the 84 new self-made billionaires’ total of $140.7 billion, the UBS Billionaire Ambitions Report 2023 found.

The study polled 79 billionaires from Europe, the Middle East, Singapore, Hong Kong and the US between June 28 and September 17.

“As many billionaire entrepreneurs age, we expect to see more than 1,000 of them pass on an estimated $5.2 trillion to their children over the next 20 to 30 years,” said Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management.

“Younger generations need to be involved in developing succession plans. There is a greater need for consensus. More than ever, families need to discover common values and purpose to navigate a way forward that appeases all generations.”

Family businesses dominate the Gulf Co-operation Council region, contributing about 60 per cent of gross domestic product to their respective economies and employing more than 80 per cent of its labour force, according to a March 2021 blog by Washington-based think tank the Atlantic Council.

In the UAE and Saudi Arabia, the Arab world’s two largest economies, family businesses account for about 90 per cent of private companies, it said.

The “rising generation” in the Middle East’s ultra-wealthy families is ready to take on more financial responsibility and bigger risks than their parents, according to a report this month by Swiss private bank Julius Baer.

Globally, billionaire wealth partially recovered in the 2022-2023 period, lifted by billionaires with consumer and retail businesses in Europe, after falling by almost a fifth in the previous 12 months, the UBS report said.

The number of billionaires rose by 7 per cent globally last year to 2,544 from 2,376 and their wealth recovered by 9 per cent to $12 trillion from $11 trillion, the study found.

“The EMEA [Europe, Middle East and Africa] region posted the strongest performance as 2022’s post-pandemic shopping splurge boosted the profits and share prices of France’s leading luxury goods and cosmetics companies, benefiting billionaire families behind them,” Mr Cavalli said.

Total wealth in the EMEA region rose to $2.6 trillion and the number of billionaires grew by more than 10 per cent to 519 from 459.

In the Middle East, the UAE recorded a notable jump in wealth and became home to more billionaire wealth than other countries in the region, the UBS report said.

The Americas continued to have the largest concentration of billionaire wealth, with 867 billionaires accounting for about $5 trillion of wealth.

Billionaire wealth fell in India and expanded at a much slower pace in China, the report found.

The consumer and retail sectors accounted for the biggest increase in billionaire wealth globally, growing at 18.1 per cent to $2.6 trillion over the past 12 months, followed by media and entertainment with a 10.4 per cent year-on-year increase.

Each generation has their own view on legacy, with 68 per cent of billionaires with inherited wealth saying that they aim to continue and grow what their parents achieved in terms of business, brand or assets, according to UBS’s findings.

“As they inherit their parents’ businesses, investments and foundations, heirs look to focus more on today’s major economic opportunities and challenges, such as new technologies, the clean energy transformation and impact investing,” the report said.

A majority of first-generation billionaires in the EMEA region ranked geopolitical tensions and the inflation outlook as their primary concerns, the study found.

In contrast, billionaire heirs in the region cited new technologies disrupting or destroying the existing operating model of their business as the biggest risk.

However, there was consensus on the opportunities and risks of generative artificial intelligence, with 65 per cent viewing artificial intelligence as offering one of the greatest commercial opportunities to their operating business over the next 12 months, according to UBS.

Half of all billionaires polled in the EMEA region plan to increase exposure to developed market bonds, closely followed by hedge funds.

Among billionaire heirs, there is a strong entrepreneurial theme and many see alternative opportunities to joining the C-suite of the family business, UBS said.

More than half of the 53 heirs polled are choosing to step away, opting for careers more suited to their own ambitions, skills and circumstances, according to the report.

There is also a rise in billionaire heirs becoming philanthropists, creating new business ventures, or building on existing ones with a focus on sustainability and philanthropy, UBS said.