The Secret Weapon of the Young and Rich billionaires

In the latest fiscal year, billionaires amassed vast fortunes through familial bequests than through enterprising endeavors. This noteworthy shift marks the first since UBS began tracking the world’s wealthiest nearly a decade ago.

Heirs to billionaire legacies demonstrate a proclivity, surpassing that of their progenitors, for engaging with pivotal opportunities and challenges within the global economic landscape. A report from the Swiss financial institution, UBS, unveiled on Thursday elucidates that these heirs exhibit a penchant for investments in burgeoning sectors such as clean energy and artificial intelligence.

Benjamin Cavalli, overseeing strategic clients in UBS’ global wealth management unit, elucidated to the press, “The trend of wealth transfer is gaining significant momentum as many billionaire entrepreneurs age. More than 1,000 billionaires are expected to pass $5.2 trillion to their children over the next 20 years.”

UBS, boasting half of the world’s billionaires as its esteemed clientele, disclosed that over the twelve months leading to April, its heirs inherited a staggering $150.8 billion. This surpassed the $140.7 billion accumulated by 84 independently self-made billionaires during the same period.

The Secret Weapon of the Young and Rich billionaires
The Secret Weapon of the Young and Rich billionaires

In total, the global billionaire cohort experienced a 7% increase, reaching 2,544 individuals. Their combined wealth increased by 9%, reaching $12 trillion before inflation.

Although this total falls short of the pinnacle attained in 2021 at $13.4 trillion, a year that witnessed a surge in global billionaire numbers post-pandemic, buoyed by appreciating assets like stocks and real estate.

The report’s revelations also mirror the subdued Initial Public Offering (IPO) landscape throughout 2022 and 2023. This dearth of IPO opportunities constrains entrepreneurs from listing their ventures and augmenting their wealth.

Europe took the lead in the augmentation of billionaire wealth for the first time, attributed to a “post-pandemic shopping splurge.” This economic fervor bolstered profits and stock values of premier luxury goods enterprises, predominantly based in France, favorably impacting the billionaire families underpinning them.

This encompasses luminaries such as Bernard Arnault, Chairman of LVMH, and his progeny, who collectively command a substantial fortune. Arnault, currently the world’s third-richest individual with a net worth of $167 billion, surpassed Tesla’s Elon Musk and Amazon’s Jeff Bezos late last year.

While technology and healthcare magnates have historically amassed considerable wealth, the report underscores “early signs of improving fortunes” for industrial billionaires, including Gautam Adani of Adani Group in India and Mukesh Ambani of Reliance Industries.

UBS acknowledges both the potential windfall and associated risks linked to the “staggering” transfer of wealth to younger generations. Benjamin Cavalli emphasized, “You can either be on the winning or receiving side of it, or… lose substantial assets in time to come if you do not know the potential beneficiaries.”

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The shift in generational control may also influence philanthropic inclinations, with heirs exhibiting a diminished focus on philanthropy compared to their predecessors. The UBS report indicates that less than a third of inheriting generations prioritize philanthropic goals, opting instead for impact investing—socially or environmentally beneficial investments.

Charitable contributions note the passing of billionaire investor Charlie Munger, aged 99, are noted. Munger, recognized for his benevolence, bequeathed Berkshire Hathaway shares worth $40 million to the Henry E. Huntington Library and Art Gallery in October, according to regulatory filings.

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