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As world's wealth declines, jewelry investments rise

June 24, 2009

New York--Amid unprecedented declines in global wealth levels in 2008, the world's richest individuals increased their allocations to jewelry, gems and watches, reflecting a belief that these were safer, more tangible investments that stood a greater chance of retaining their value, according to the 13th annual World Wealth Report, released today by Merrill Lynch Global Wealth Management and Capgemini.

The world's population of high-net-worth individuals (HNWIs), defined as those with net assets of at least $1 million, excluding their primary residence and consumables, shrunk 14.9 percent in 2008 from the year before to 8.6 million, while their wealth dropped 19.5 percent to $32.8 trillion.

The population of ultra-high-net-worth individuals, or those with net assets totaling at least $30 million, fell 24.6 percent, while their wealth dropped 23.9 percent.

The declines "wiped out two robust years of growth," said Daniel C. Sontag, president of Merrill Lynch Global Wealth Management. "Essentially, we're back at 2005 levels."

The impact of the global downturn on sales of luxury goods was severe, as worldwide demand for items perceived to be needlessly extravagant dipped considerably. Against this backdrop, however, HNWIs allotted 22 percent of their overall passion investments to jewelry, gems and watches in 2008, proportionately more than the 18 percent they allotted to the category in 2006.

"The allocations are all about 'how do I feel safer?' and 'how do I diversify?'" said Ileana van der Linde, a principal in Wealth Management Practice at Capgemini Financial Services, noting that investors increased allocations to art and jewelry, compared with pre-crisis levels, affirming the idea that these passion-investment categories might hold their value better in the long term.
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