The spending habits of the global super rich have been revealed including a rise in collectible handbags, trainers and a shifting focus towards environmental, social and governance investing (ESG), wellness and impact ivesting - with four out of five ultra-high-net-worth-individuals (UHNWIs) also admitting a shift in investment focus, a new report has highlighted.
According to the Knight Frank Wealth Index, released today, collectibles such as art, cars, watches and postage stamps have become commonplace in recent years, but the rise of collectible handbags (up 13%) and a shift towards vintage and rare trainers - including one that sold for a record-breaking $437,500 (£351,772), has caught the eye of Knight Frank's wealth report team.
The pair of rare Nike trainers, picured above (image courtesy of Sothebys Photo Credit: UNRAH/JONES), designed by the sportswear giant's co-founder were the last shoes to sell in an auction of 100 pairs of trainers in New York, last year.
The 1972 Nike Waffle Racing Flat Moon shoes had been expected to reach $160,000, but a Canadian collector, Miles Nadal, paid nearly three-times that, having already forked out a massive $850,000 for the other 99 pairs in the auction.
Other headlines in the Knight Frank include:
- New entry 'Collectable Handbags' takes top spot in the Knight Frank Luxury Investment Index with 13% annual growth.
- Four in five UHNWIs to alter 2020 investing strategies amid global economic slowdown and political upheaval.
- Global UHNWI population to grow by 27% over the next five years according to Knight Frank.
- Asian cities dominate top rankings in Knight Frank's Prime International Residential Index.
- New York replaces London at the top the Knight Frank City Wealth Index, with Oslo topping the City Wellness Index.
- Wealthy investors rank property above bonds and equities.
The rise of ESG
On the rise of ESG, Liam Bailey, pictured below left, Knight Frank's global head of research, pointed how ESG, wellness and impact investing are defining investment trends for the year ahead.
In December, the Financial Times in London claimed that 2019 was the year "capitalism went cuddly". If so, then 2020 will be the year this new altruism can expect to be held to account," said Bailey.
"The trend towards a softer version of capitalism has been driven in part by a corporate desire to rebuild the trust which many felt had been lost in the aftermath of the global financial crisis, as low interest rates and the resulting asset price boom helped the business world and the wealthy to flourish.
"In this context, corporate virtue signalling can be seen as a sensible defensive move, heading off interventions promoted by politicians.
"As Alan Schwartz, chairman of the investment bank Guggenheim Partners, put it last year: "Throughout the centuries…when the masses think the elites have too much, one of two things happens: legislation to redistribute wealth...or revolution to redistribute poverty." Bailey points that the world undergoing the largest transfer of wealth in history: US$24 trillion from "baby boomers to millennials".
"Changing sentiment is already having an impact on investment decisions," he said. "Our own Attitudes Survey this year reveals that 45% of respondents believe wealthy investors are becoming increasingly concerned about the impact the buildings they invest in are having on the wider environment.
Bailey adds that there also appears to be a financial rationale for embracing ESG.
By the Global Sustainable Investment Alliance's calculations, funds managing US$31 trillion - a quarter of the world's total - apply some form of ESG screen to their investments.
A growing body of research appears to validate such an approach, showing out-performance by companies scoring well on ESG criteria. It is not yet clear, though, whether ESG promotes success or whether successful companies embrace ESG.
The 2020 instalment of Knight Frank's unique survey is based on responses provided during October and November 2019 by 620 private bankers and wealth advisors who between them manage US$3.3 trillion of private client wealth. The survey examines the factors that influence UHNWI wealth creation, investment decisions and attitudes towards philanthropy and other wealth management and lifestyle trends.