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China – The Future of HNWIs to 2015: Opportunities for Wealth Managers and Private Banks

© WealthInsight. This report is a licensed product and is not to be photocopied.

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Brazil – The Future of HNWIs

to 2016:

The Latin American Giant

Publication date: June, 2012

Report code: WI00048MR

TABLE OF CONTENTS

Brazil – The Future of HNWIs to 2016: The Latin American Giant

© WealthInsight. This report is a licensed product and is not to be photocopied. Page 1

TABLE OF CONTENTS

1 Introduction ............................................................................................................................ 8

1.1 What is this Report About? ............................................................................................................ 8

2 Executive Summary ............................................................................................................. 11

3 Wealth Management Fundamentals ................................................................................... 14

3.1 Political Background to Brazil ..................................................................................................... 14

3.2 Economic Background to Brazil .................................................................................................. 17

3.3 Benchmarking Brazil’s Wealth in Context ................................................................................... 19

3.3.1 Distribution of wealth ......................................................................................................................................... 19

4 Findings from the WealthInsight HNWI Database ............................................................. 22

4.1 Trends in HNWI Wealth to 2016 ................................................................................................... 22

4.1.1 HNWI trend analysis .......................................................................................................................................... 22

4.1.2 HNWI volume trend analysis ............................................................................................................................. 23

4.1.3 HNWI wealth trend analysis .............................................................................................................................. 24

4.1.4 Per capita HNWI trend analysis ........................................................................................................................ 25

4.1.5 Trends of the wealth bands ............................................................................................................................... 26

4.1.6 Demographic breakdown of HNWI .................................................................................................................... 28

4.2 UHNWIs ......................................................................................................................................... 29

4.2.1 UHNWI volume trend analysis .......................................................................................................................... 29

4.2.2 UHNWI wealth trend analysis ............................................................................................................................ 31

4.2.3 Demographic breakdown of UHNWIs ............................................................................................................... 32

4.2.4 UHNWIs – job titles ........................................................................................................................................... 33

4.2.5 UHNWIs – industry breakdown ......................................................................................................................... 34

4.2.6 UHNWIs – industry performance ....................................................................................................................... 35

4.2.7 UHNWIs – breakdown by city ............................................................................................................................ 36

4.2.8 UHNWIs – city performance .............................................................................................................................. 37

4.2.9 UHNWIs – city forecasts .................................................................................................................................... 39

4.3 UHNWIs – billionaires ................................................................................................................... 41

4.3.1 Billionaire volume trend analysis ....................................................................................................................... 42

4.3.2 Billionaire wealth trend analysis ........................................................................................................................ 42

4.3.3 Billionaire per capita net worth trend analysis ................................................................................................... 42

4.3.4 List of Billionaires ............................................................................................................................................... 43

4.4 UHNWIs – Centimillionaires ......................................................................................................... 44

4.4.1 Centimillionaire volume trend analysis .............................................................................................................. 45

4.4.2 Centimillionaire wealth trend analysis ............................................................................................................... 45

4.4.3 Centimillionaire per capita net worth trend analysis .......................................................................................... 45

4.5 UHNWIs – Affluent Millionaires .................................................................................................... 46

4.5.1 Affluent millionaire volume trend analysis ......................................................................................................... 47

4.5.2 Affluent millionaire wealth trend analysis .......................................................................................................... 47

4.5.3 Affluent millionaire per capita net worth trend analysis ..................................................................................... 47

TABLE OF CONTENTS



4.6 Core HNWIs ................................................................................................................................... 48

4.6.1 Core HNWI volume trend analysis .................................................................................................................... 48

4.6.2 Core HNWI wealth trend analysis ..................................................................................................................... 48

4.7 Core HNWIs – Mid-Tier Millionaires ............................................................................................. 49

4.7.1 Mid-tier millionaire volume trend analysis ......................................................................................................... 50

4.7.2 Mid-tier millionaire wealth trend analysis ........................................................................................................... 50

4.7.3 Mid-tier millionaire per capita net worth trend analysis ..................................................................................... 50

4.8 Core HNWIs – Lower-Tier Millionaires ......................................................................................... 51

4.8.1 Lower-tier millionaire volume trend analysis ..................................................................................................... 51

4.8.2 Lower-tier millionaire wealth trend analysis....................................................................................................... 52

4.8.3 Lower-tier millionaire per capita net worth trend analysis ................................................................................. 52

5 Analysis of Brazilian HNWI Investments ............................................................................ 53

5.1 Analysis by Asset Class ............................................................................................................... 53

5.1.1 Changing trends in liquid assets (equity, fixed income and cash and deposits) ............................................... 55

5.1.2 Trends in alternative assets............................................................................................................................... 57

5.1.3 Trends in “Art, Wine and Wheels” ..................................................................................................................... 59

5.1.4 Trends of investments in real estate ................................................................................................................. 61

5.1.5 Trends of investments in cash and deposits ..................................................................................................... 65

5.1.6 Trends of investments in fixed income .............................................................................................................. 65

5.1.7 Trends of investments in equity ......................................................................................................................... 66

5.1.8 Trends of investments in business interest ....................................................................................................... 67

5.2 Analysis of Foreign Investments ................................................................................................. 68

5.2.1 Trend of investments in North America ............................................................................................................. 69

5.2.2 Trend of investments in Latin America and Caribbean ..................................................................................... 70

5.2.3 Trend of investments in Europe ........................................................................................................................ 70

5.2.4 Trend of investments in Asia-Pacific region ...................................................................................................... 70

5.3 Analysis of Brazilian UHNWI Investments .................................................................................. 71

6 The Wealth Sector in Brazil ................................................................................................. 73

6.1 Competitive Landscape ................................................................................................................ 73

6.1.1 Private banks ..................................................................................................................................................... 73

6.1.2 Wealth managers .............................................................................................................................................. 75

6.1.3 Wealth management in each city ...................................................................................................................... 76

6.1.4 Family offices ..................................................................................................................................................... 77

6.2 Brazil Wealth Management Industry – Clientele Model and Maturity ........................................ 79

6.3 Behavioral Mapping of Wealth Management and Private Banking Industry in Brazil .............. 80

6.4 Porter’s Five Force Analysis– Wealth Management Industry in Brazil ..................................... 81

6.5 Financial Services Review ........................................................................................................... 83

6.6 Case Study: Top-10 Global Private Banks .................................................................................. 85

7 Appendix ............................................................................................................................... 86

7.1 Regulatory Environment in Brazil ................................................................................................ 86

7.1.1 Banking regulations ........................................................................................................................................... 86

7.1.2 Regulations on Taxes ........................................................................................................................................ 86

TABLE OF CONTENTS



7.1.3 Regulations on wealth management and private banking ................................................................................ 88

7.1.4 Regulations related to immigration, investment and employment..................................................................... 88

7.2 Social Background of Brazil......................................................................................................... 88

7.3 Key economic trends and drivers ................................................................................................ 89

7.3.1 LC to USD Exchange Rate ................................................................................................................................ 89

7.3.2 Real GDP growth ............................................................................................................................................... 90

7.3.3 GDP per capita .................................................................................................................................................. 91

7.3.4 Domestic market capitalization .......................................................................................................................... 92

7.3.5 Housing price indices ........................................................................................................................................ 93

7.3.6 Commodity index ............................................................................................................................................... 94

7.3.7 Foreign direct investment .................................................................................................................................. 95

7.3.8 Investments of FIIs in equity products ............................................................................................................... 96

7.3.9 Inflation rate ....................................................................................................................................................... 97

7.3.10 Interest rate ....................................................................................................................................................... 98

7.3.11 Balance of payments ......................................................................................................................................... 99

7.3.12 Government debt ............................................................................................................................................. 100

7.3.13 Stock market performance .............................................................................................................................. 101

7.3.14 HNWI wealth to GDP ratio ............................................................................................................................... 102

8 About WealthInsight .......................................................................................................... 105

TABLE OF CONTENTS



LIST OF TABLES

Table 1: HNWI Wealth Band and Group Definitions .................................................................................................................................... 9

Table 2: Regions in Brazil ......................................................................................................................................................................... 15

Table 3: Largest 10 Cities in Brazil ............................................................................................................................................................ 16

Table 4: HNWIs – Volume Distribution Wealth Pyramid, 2011 ................................................................................................................... 26

Table 5: HNWIs – Wealth Distribution Wealth Pyramid (% Share), 2011 ................................................................................................... 27

Table 6: UHNWIs – Top Sectors for UHNWIs in Major Cities, 2011 ........................................................................................................... 34

Table 7: UHNWIs – Top 14 Brazilian Cities for UHNWIs, 2011 .................................................................................................................. 36

Table 8: UHNWIs – UHNWI population density in Major Cities, 2011 ........................................................................................................ 38

Table 9: UHNWIs – UHNWI Growth Rates for Top 14 Cities, 2007–2016 .................................................................................................. 40

Table 10: UHNWIs – Billionaires – Market Overview, 2007–2016 .............................................................................................................. 41

Table 11: Billionaire List, 2011 .................................................................................................................................................................. 43

Table 12: UHNWIs – Centimillionaires – Market Overview, 2007–2016 ..................................................................................................... 44

Table 13: UHNWIs – Affluent Millionaires – Market Overview, 2007–2016 ................................................................................................ 46

Table 14: Core HNWIs – Mid-Tier Millionaires – Market Overview, 2007–2016 ......................................................................................... 49

Table 15: Core HNWIs – Lower-Tier Millionaires – Market Overview, 2007–2016 ..................................................................................... 51

Table 16: HNWIs – HNWI Holdings Growth (%), 2007–2016 ..................................................................................................................... 54

Table 17: HNWIs – Liquid Asset Composition (%), 2007–2016 ................................................................................................................. 56

Table 18: HNWIs – Trends of Investments in Alternative Assets (%), 2007–2016 ..................................................................................... 58

Table 19: HNWIs – Alternative Asset Composition (%), 2007–2016 .......................................................................................................... 58

Table 20: HNWIs – Trends in “Art, Wine and Wheels”, 2007–2011 ........................................................................................................... 59

Table 21: HNWIs – Residential Real Estate Prices Per City, 2011 ............................................................................................................ 61

Table 22: HNWIs – Foreign Real Estate investment in Brazil, 2007–2016 ................................................................................................. 62

Table 23: HNWIs – Prime International Cities, 2007–2011 ........................................................................................................................ 63

Table 24: HNWIs – % Foreign Allocation, 2007–2016 – X Axis ................................................................................................................. 68

Table 25: UHNWIs – Allocations and Share of HNWI Assets, 2011 ........................................................................................................... 72

Table 26: Largest Private Banks in Brazil, 2011 ........................................................................................................................................ 74

Table 27: Emerging Private Banks in Brazil, 2011 ..................................................................................................................................... 74

Table 28: Wealth Manager Asset Allocation in Brazil, 2011 ....................................................................................................................... 75

Table 29: Wealth Management Companies Per-City, 2011 ....................................................................................................................... 76

Table 30: Family Offices in Brazil .............................................................................................................................................................. 78

Table 31: Top ten mutual-fund managers in Brazil, 2011 ........................................................................................................................... 83

Table 32: Top ten pension-fund managers in Brazil, 2011 ......................................................................................................................... 84

Table 33: Top-10 Private Equity Firms in Brazil, 2011 ............................................................................................................................... 84

Table 34: Top 10 Private Banks by Global AuM and New Money (US$ Billion), 2011 ................................................................................ 85

Table 35: LC to USD Exchange Rate, 2006–2016 ..................................................................................................................................... 89

Table 36: Real GDP Growth, 2006–2016 .................................................................................................................................................. 90

Table 37: GDP Per Capita, 2006–2016 ..................................................................................................................................................... 91

Table 38: Domestic Market Capitalization, 2006–2011 .............................................................................................................................. 92

Table 39: Housing Price Index, 2006–2011 ............................................................................................................................................... 93

Table 40: Commodity Indices, 2006–2016 ................................................................................................................................................ 94

Table 41: Foreign Direct Investments, 2006–2016 .................................................................................................................................... 95

Table 42: Investments of FIIs in Equity Products, 2006–2010 ................................................................................................................... 96

TABLE OF CONTENTS



Table 43: Inflation Rate, 2006–2016 .......................................................................................................................................................... 97

Table 44: Money Market Rate, 2006–2016 ................................................................................................................................................ 98

Table 45: Balance of Payments, 2006–2011 ............................................................................................................................................. 99

Table 46: Government Debt to GDP, 2006–2016 .................................................................................................................................... 100

Table 47: Stock Market Performance, 2006–2011 ................................................................................................................................... 101

Table 48: HNWI Wealth vs. GDP Ratio, 2007–2016 ................................................................................................................................ 102

Table 49: Appendix One .......................................................................................................................................................................... 103

Table 50: Appendix Two .......................................................................................................................................................................... 104

TABLE OF CONTENTS



LIST OF FIGURES

Figure 1: HNWI Wealth Band Definitions ................................................................................................................................................... 10

Figure 2: Asset Price Performance, 2007–2011 ........................................................................................................................................ 19

Figure 3: Brazilian HNWI Performance, 2007–2016 .................................................................................................................................. 20

Figure 4: HNWI – Brazil vs the World ........................................................................................................................................................ 21

Figure 5: HNWIs – Growth Factor Correlation, 2007–2011 ........................................................................................................................ 22

Figure 6: HNWIs – Volume by Wealth Band, 2007–2016 .......................................................................................................................... 23

Figure 7: HNWIs – Wealth by Wealth Band (in US$ Billion), 2007–2016 ................................................................................................... 24

Figure 8: HNWIs – Per Capita Net Worth (in US$ Million), 2007–2016 ...................................................................................................... 25

Figure 9: HNWIs – Volume Distribution Wealth Pyramid, 2011 .................................................................................................................. 26

Figure 10: HNWIs – Wealth Distribution Wealth Pyramid (% Share), 2011 ................................................................................................ 27

Figure 11: HNWIs – Age Distribution, 2011 ............................................................................................................................................... 28

Figure 12: UHNWIs – Wealth Share vs Volume Growth, 2007–2011 ......................................................................................................... 29

Figure 13: UHNWIs – Volume by Wealth Band, 2007–2016 ...................................................................................................................... 30

Figure 14: UHNWIs – Wealth by Wealth Band (in US$ Billion), 2007–2016 ............................................................................................... 31

Figure 15: UHNWIs – Age Distribution (% Share), 2011 ............................................................................................................................ 32

Figure 16: UHNWIs – Job Titles, 2007–2011............................................................................................................................................. 33

Figure 17: UHNWIs – Distribution by Industry, 2011 .................................................................................................................................. 34

Figure 18: UHNWIs – Sector Performance, 2007–2011 ............................................................................................................................ 35

Figure 19: UHNWIs – City Performance, 2007-2011 ................................................................................................................................. 37

Figure 20: UHNWIs – Regional Forecasts, 2011–2016 ............................................................................................................................. 39

Figure 21: UHNWIs – Billionaires – Market Overview, 2007–2016 ............................................................................................................ 41

Figure 22: UHNWIs – Centimillionaires – Market Overview, 2007–2016 .................................................................................................... 44

Figure 23: UHNWIs – Affluent Millionaires – Market Overview, 2007–2016 ............................................................................................... 46

Figure 24: Core HNWIs – Mid-Tier Millionaires – Market Overview, 2007–2016 ........................................................................................ 49

Figure 25: Core HNWIs – Lower-Tier Millionaires – Market Overview, 2007–2016 .................................................................................... 52

Figure 26: HNWIs – Asset Class Composition, 2007–2016 ....................................................................................................................... 53

Figure 27: HNWIs – Changing Trends in Total Liquid Assets (as a Percentage of Total Assets), 2007–2016 ............................................ 55

Figure 28: HNWIs – Trends of Investments in Alternative Assets (in US$ Billion), 2007–2016 .................................................................. 58

Figure 29: HNWIs – Trends in “Art, Wine and Wheels”, 2007–2011 .......................................................................................................... 59

Figure 30: HNWIs – Foreign Investment Allocation and Growth by Asset Class (%), 2011–2016 .............................................................. 68

Figure 31: HNWIs – Global Distribution of Foreign Investments, 2007–2016 ............................................................................................. 69

Figure 32: UHNWIs – Asset Class Composition, 2007–2016 ..................................................................................................................... 71

Figure 33: Wealth Management Industry in Brazil – Maturity Level of Players ........................................................................................... 79

Figure 34: Brazil Wealth Management Industry – Behavioral Mapping, 2011 ............................................................................................ 80

Figure 35: Wealth management industry in Brazil – Five Forces Analysis ................................................................................................. 81

Figure 36: LC to USD Exchange Rate, 2006–2016 ................................................................................................................................... 89

Figure 37: Real GDP Growth (%), 2006–2016 ........................................................................................................................................... 90

Figure 38: GDP Per Capita, 2006–2016 .................................................................................................................................................... 91

Figure 39: Domestic Market Capitalization, 2006–2011 ............................................................................................................................. 92

Figure 40: Housing Price Index, 2006–2011 .............................................................................................................................................. 93

Figure 41: Commodity Indices, 2006–2016 ............................................................................................................................................... 94

Figure 42: Foreign Direct Investments, 2006–2016 ................................................................................................................................... 95

TABLE OF CONTENTS



Figure 43: Investments of FIIs in Equity Products, 2006–2010 .................................................................................................................. 96

Figure 44: Inflation Rate, 2006–2016 ........................................................................................................................................................ 97

Figure 45: Money Market Rate, 2006–2016 .............................................................................................................................................. 98

Figure 46: Balance of Payments, 2006–2011 ............................................................................................................................................ 99

Figure 47: Government Debt to GDP, 2006–2016 ................................................................................................................................... 100

Figure 48: Stock Market Performance, 2006–2011 .................................................................................................................................. 101

Figure 49: HNWI Wealth vs GDP Ratio, 2007–2016 ................................................................................................................................ 102

INTRODUCTION



1 Introduction

1.1 What is this Report About?

This report is the result of WealthInsight’s extensive research covering the high net worth

individual (HNWI) population and wealth management market in Brazil.

It provides a market overview and forecast of the HNWI population and HNWI wealth across

asset classes. By utilizing the WealthInsight HNWI Database, it also provides information on

HNWI across demographic factors.

For the purposes of this report, the phrase “coverage period” refers to the period of 2007–2016,

while the “review period” relates to the years 2007–2011 and the “forecast period” relates to the

years 2011–2016.

This report categorizes the Brazilian HNWI population across five wealth bands that are defined

in Table 1, and analyzes HNWI wealth investments across asset classes and geographical

regions.

To provide a comprehensive analysis of HNWI wealth, wealth in this report is defined as the net

value of assets, which includes both financial holdings and tangible assets. Financial holdings

and tangible assets include alternative assets, real estate (excluding the primary residence),

cash and deposits, fixed-income, equities and business interests.

INTRODUCTION



Table 1: HNWI Wealth Band and Group Definitions

Wealth Band Definition

Billionaires Billionaires are those HNWIs with wealth of US$1 billion or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Centimillionaires Centimillionaires are those HNWIs with wealth of between US$100 million and less than US$1 billion, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Affluent Millionaires

Affluent millionaires are those HNWIs with wealth of between US$30 million and less than US$100 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Mid-Tier Millionaires

Mid-tier millionaires are those HNWIs with wealth of between US$5 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Lower-Tier Millionaires

Lower-tier millionaires are those HNWIs with wealth of between US$1 million and less than US$5 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Wealth Group Definition

HNWIs The high net worth individuals (HNWIs) wealth group comprises all wealth bands. It represents those individuals with wealth of US$1 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

UHNWIs

The ultra high net worth individuals (UHNWIs) wealth group comprises the billionaire, centimillionaire and affluent millionaire wealth bands. It represents those individuals with wealth of US$30 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Core HNWIs

The core HNWIs group comprises the mid-tier millionaire and lower-tier millionaire wealth bands. It represents those individuals with wealth of between US$1 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Source: WealthInsight © WealthInsight

ABOUT WEALTHINSIGHT



2 About WealthInsight

WealthInsight provides detailed data and insightful analysis on the world's HNWI and wealth sector.

With decades of experience providing business information, WealthInsight helps organizations to make

informed decisions and win new business.

At WealthInsight's core is our proprietary HNWI Database of the world's wealthiest individuals. Around

this database we have built a number of valuable research-based products and services that make

WealthInsight much more than just a rich contact list.

We work with and provide solutions for:

Wealth managers

Private banks

Family offices

Technology providers

Professional services – consultants, accountants, lawyers and real estate professionals

Fund managers, hedge fund managers, asset managers, venture capitalists

Non-profit and educational institutions

WealthInsight’s corporate headquarters are located in London, with offices in New York, San Francisco,

Sydney, Seoul and Hong Kong.

For more information on WealthInsight please visit www.wealthinsight.com

Reports

WealthInsight publishes high-quality research reports focused on the wealth sector. The reports provide

comprehensive analysis of countries, regions and special topics.

With the HNWI Database as the foundation for its primary research and analysis, WealthInsight is able

to obtain an unsurpassed level of granularity, insight and authority on the HNWI universe in each of the

countries and regions covered.

All reports are available as a part of the WealthInsight Intelligence Centre. Reports can also be

purchased on a subscription or one-off basis.

Every WealthInsight report is uniquely formulated for the region, country or topic covered. Key features

of the reports include:

Market sizing

Forecasting

Benchmarking

HNWI asset allocation

Behavioral mapping

Family offices

http://www.wealthinsight.com/

ABOUT WEALTHINSIGHT



Methodology

WealthInsight’s team of in-house analysts devise and collect data over a historical period of five years

and develop forecasts for a five-year forecast period. All WealthInsight Wealth Reports are rigorously

sourced and created according to a comprehensive methodological process:

Internal audit

Review of in-house databases to gather existing data:

Historic market databases and reports

HNWI Database

Wealth management, private bank and family office database

Financial deals and news archive

Secondary research

Collection of the latest market-specific data from a wide variety of industry sources:

Government statistics

Industry associations

Company filings

Broker reports

International organizations

Primary research

Review of the latest wealth management and private banking industry trends

Surveys using panels compiled from across the wealth sector:

Wealth management and private banking professionals

Financial services experts

High net worth individuals

Expert opinion

Collation of opinion taken from WealthInsight interviews of leading industry experts

Analysis of third-party opinion and forecasts:

Broker reports

Industry associations

Wealth management and private banking media

Official government sources

Leading academic research and commentary

Data consolidation and verification

Consolidation of data and opinion to create historical datasets

Creation of models to benchmark data across sectors, asset classes and geographies

Market forecasts

Feed of forecast data into market models:

Macroeconomic indicators

Industry-specific drivers

ABOUT WEALTHINSIGHT



Analysis of the WealthInsight HNWI Database and Wealth sector company databases to

identify key trends:

Latest wealth trends

Key drivers of the wealth management industry

Report writing

Analysis of market data

Discussion of company and industry trends and issues

Integration of survey results

Annual review of financial deals and wealth management trends

Standardization of market definitions using recognized industry classifications

Quality control

Peer review

Senior-level QC

Random spot checks on data integrity

Benchmark checks across databases

Market data cross-checked for consistency with accumulated data from:

Internal databases

Company filings

Notable contributors to this report:

Andrew Amoils

Senior Analyst and Head of Reports Team, WealthInsight

Shekhar Tripathi

Senior Analyst, WealthInsight

Sunil Kumar Agarwal

Analyst, WealthInsight

ABOUT WEALTHINSIGHT



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