SINGAPORE (Nov 8): Some 64% of the billionaires in Singapore are self-made, according to research published Friday by UBS Wealth Management and professional services firm PwC.

While the total number of Singaporean billionaires remained unchanged at 22, their combined wealth grew 11% year-on-year to hit US$71.3 billion ($96.8 billion) in 2018 – with the self-made billionaires holding just over half of this total, the report said.

According to the annual UBS and PwC Billionaires Insights report, the top three wealth drivers in the city state in 2018 were the real estate, consumer and retail, and material industries.

In Asia Pacific, the total wealth of billionaires has quadrupled over the last five years to hit US$2.5 trillion in 2018, the report said.

Asia Pacific’s 754 billionaires accounted for over a third of the world’s total billionaire population – maintaining pole position as the region with the highest number of billionaires.

The rise of the region has been led by China, where the billionaires’ combined net worth has tripled to US$982.4 billion over the last five years, despite retreating 12.3% y-o-y in 2018.

Over the past five years, China’s entrepreneurs have overtaken Russia to become the world’s second largest billionaire group, with the Middle Kingdom’s 325 billionaires accounting for 43% of Asia Pacific’s billionaire population.

Driving market outperformance

The report also notes an interesting phenomenon: that billionaire-controlled publicly listed companies returned almost twice the average market performance.

Over the last 15 years to the end of 2018, these billionaire-controlled firms recorded an annualised performance of 17.8%, compared to the 9.1% of the Morgan Stanley Capital International All Country World Index (MSCI ACWI).

In addition, the average return on equity for these companies was 16.6% over the same period, significantly higher than the 11.3% for companies in the MSCI ACWI. 

The MSCI ACWI is a market capitalisation weighted index that measures equity-market performance across 23 developed countries and 24 emerging markets.

Ravi Raju, head of Ultra-High Net Worth Individuals (UNHW), APAC at UBS Global Wealth Management, notes that companies run by Asian billionaires were generally “more profitable than the market” over the past 10 years. 

“Entrepreneurs account for 70% of [UBS’s] client base in Asia Pacific and they are the key drivers of wealth creation here,” Raju shares. 

However, the investment also notes that Singapore billionaires are 71 years old on average – significantly higher than the global average age of 64 years. 

“We can anticipate that wealth transfer has already started and will be gaining pace over the next 10-20 years,” says Julie Leong, a partner and private banking leader with PwC Singapore. 

“Economies across APAC continue to mature at an accelerated pace and the number of billionaires have grown in tandem,” she adds. 

According to the report, nearly half of the Singaporean billionaires were above 70 years old, and are expected to transfer some US$33.1 billion over the course of the next two decades. 

Raju opines that the wealth transfer would present the Singapore economy with opportunities to tap on new industries such as fintech and e-commerce, which would in turn boost the economy significantly. 

Looking ahead, Tan Min Lan, head of the Asia-Pacific investment office at UBS Wealth Management Chief Investment Office, urges investors to manage risks through a diversification strategy. 

Tan shares that global growth has slowed from 3.8% in 2018 to 3.2% in 2019, and is projected to moderate further to 3.0% in 2020. She adds that geopolitical events such as the US-China trade war would be key determinants of the macroeconomic climate. 

“While monetary policy will keep a recession at bay, it will not be strong enough to reignite an economic recovery,” says Tan.