After two years of robust growth in the world’s population of high net worth individuals, hefty declines in the value of assets wiped out 15% of this group in 2008, a new report reveals.

The 13th annual World Wealth Report, released on Wednesday by Merrill Lynch Global Wealth Management and Capgemini, finds that the population of individuals with net assets of at least $1 million, excluding their primary residence and consumables, dropped by 14.9% in 2008.

Corresponding with the drop in the size of the group was a 19.5% plunge in global high net worth wealth to $32.8 trillion — an amount lower than 2005 levels.

The population of ultra high net worth individuals with net assets of at least $30 million was hit even harder during the downturn, falling by 24.6% in 2008. This group’s wealth plummeted 23.9% during the year.

“This year’s World Wealth Report shows a distinct shift from our reports in recent years,” said Bertrand Lavayssière, managing director of Global Financial Services at Capgemini, which provides consulting, technology and outsourcing services around the world.

“After a year of significant volatility, we’re seeing a shift in high net worth individual activity and priorities. There are currently opportunities for wealth management firms and advisors to understand and effectively address increased client concerns by helping to navigate through the uncertain economic times and build relationships that will continue well into the future,” Lavayssière said.

North America, Asia, and Europe continue to host large proportions of the total high net worth population, with more than half the population located in U.S., Japan, and Germany. The U.S. population dropped 18.5% in 2008, but the country remains the single largest home to high net worth individuals, with 2.5 million, or 28.7% of the total global population.

The proportion of high net worth individuals in China surpassed the U.K.’s proportion, putting China in the fourth spot from the top. Hong Kong’s population shrank the most in 2008, tumbling 61.3% to 37,000.

Shift to safer investments

As widespread market volatility set in last year, high net worth investors reduced their equity exposure and boosted their holdings of fixed income investments, cash and liquid assets. In additional, a greater proportion of financial assets were allocated to real-estate holdings, which jumped 4% to 18% of the total global high net worth portfolio.

The proportion of cash-based holdings also significantly increased in 2008, surging to 21% of overall portfolios, up 7% from 2006. But high net worth individuals in North American held the lowest amount of cash or deposits as a percentage of their total portfolios, at 14%, an increase of 3 percentage points from 2007.

“Last year was about preservation, not appreciation,” said Dan Sontag, president of Merrill Lynch Global Wealth Management. “With no safe havens HNWIs ended up with significant amounts of cash in their portfolios. As markets recover, they will have the flexibility to readjust their strategies and reinvest in new, developing opportunities along the way.”

Going forward, a recovery of the global economy is expected to spark renewed growth in high net worth wealth around the world. The wealth is expected to grow to $48.5 trillion by 2013, advancing by an annual rate of 8.1%. North America and the Asia-Pacific regions are predicted to lead in wealth growth, according to the report, with Asia-Pacific surpassing North America by 2013.

IE