Israel bred 1,000 millionaires in 2007

The number of millionaires in Israel grew at twice the average world rate in 2007, according to the World Wealth Report by Merrill Lynch and Capgemini. Moreover, the analysts found more than a subtle taste for "green" developing, if not always for the loftiest of reasons.

The number of millionaires in Israel jumped 13.6% - by 1,000 persons - to a total of 8,200 by the end of last year. The number of multi-millionaires grew by 12%, to 97. The report defines a millionaire as an individual with liquid assets of at least $1 million, excluding primary residence and consumables. The definition of a multimillionaire is a person who has at least $30 million in the bank.

Internationally, the number of high net worth individuals (HNWI) grew by 6% in 2007, and their wealth increased by 9.4%, to total $40.7 trillion. There were 8.8% more multi-millionaires last year as well, for a total of 103,320 people. And last year, for the first time, the average value of assets belonging to the world's rich surpassed $4 million apiece.

The report forecasts that the wealth of millionaires will grow at an annual rate of 7.7% over the next few years, to $59.1 billion by 2012.

On the downside, the report found to a widening gap between the handful of the rich and the huge number of poor people in the world.

Some 2.6 billion people - about 40% of the world's population - live on less than $2 a day, according to the 2007 World Bank report. In addition, 45% of the world's 2.2 billion children live in poverty.

The numbers appearing in the Merrill Lynch report come from macroeconomic data on the wealth of nations and their internal wealth distribution, based on a model developed in the 1980s by Capgemini and Merrill Lynch. The data is not a collection of individual figures, but a composite of data from local governments, the World Bank and the International Monetary Fund, on wealth distribution and asset values.

Sigal Shapira, director of personal banking at Merrill Lynch Israel, said the sharp increase in the number of Israeli millionaires comes in part due to the wealth and benefits that controlling shareholders of Israeli companies have accumulated.

Israeli firms raised more than $25 billion in private placements and public offerings in 2007 which enabled some of their ownerrs to exit investments and accumulate liquid assets, she said. Shapira added that some local high net worth individuals have made financial and real investments in Israel and worldwide, which earned substantial profits upon their sale. "Although Israel's growth rate is double the international average, it is nevertheless growing slower than India, China or Brazil," she said.

Furthermore, the shekel appreciated by 10% against the dollar in 2007.

The year 2007 was a seminal one for the global economy, according to the Merrill Lynch report, and this had a visible affect on the number of millionaires and the sources of wealth. "Investment in global markets did not present an important growth engine, as was the case in 2006," Shapira said. "While in the first half of the year, the growth trend of former years continued, the second half saw a widening gap between developed countries, which experienced slower growth, compared to emerging markets, which continued to expand, at a double-digit pace in some cases."

Prosperity in emerging markets resulted primarily from the flourishing export sector, and increasing local demand generated by economic growth.

The Middle East saw the sharpest regional increase in the number of millionaires - 15.6%, mainly from the commodities sector.

The so-called BRIC countries - Brazil, Russia, India and China - continued to take center stage, not only in economic growth but in the increasing number of millionaires. India led the list, with 22.7% more millionares, for a total of 123,000, along with a 118% increase in the value of its stock market and a 7.9% rise in its gross domestic product. China followed in second place, in spite of an even sharper economic growth rate. China saw 20.3% more millionaires, totaling 415,000, and its stock market value shot up by 291% and economic growth increased 11.4%. Brazil enjoys the third fastest increase in millionaires - 19.1% - due, among other things, to a vibrant IPO market.

IPO activity is one of the leading contributors to the number of HNWI in emerging economies. In 2007, more than 1,300 companies raised more than $300 billion in IPOs, 70% of which were in emerging markets. BRIC countries alone accounted for 39% of the world IPO market. The flow of capital into emerging markets has been another strong factor behind the number of local millionaires in these countries.

But developed countries have suffered from the U.S. economic slowdown, reflected in slowed economic growth in Europe and Japan, particularly in the real estate and credit markets. Correspondingly, HNWI are apparently continuing to reduce their holdings in North America, and investing more in their local economies. Bonds and deposits constituted 44% of the financial revenues of the world's wealthy, up 9%, reflecting a transition to more stable investments.

Another trend noted in the report is the rising popularity of green investments. Green investment instruments fed growth in sectors like clean tech, which has enjoyed an increase of 41% over the past two years, particularly in the fields of wind and solar energy. True, all that glitters is not green and biofuel for instance is highly controversial, but it's become quite the dernier cri.

According to the report, the Middle East and Europe saw the heaviest environmental investment by HNWI: 17% to 21% of the wealthy in these areas included "green" investments in their portfolio in 2007, compared to just 5% of the wealthy in the United States. Green investment is not inspired solely by lofty principles - it has also become highly profitable. Solar energy, for instance, saw growth of 150% in 2007.

Last year also saw an increase in so-called "investments of passion," which include luxury collectibles (automobiles, boats, airplanes), jewelry, art, sports-related investments (professional teams, sailing, race horses) and other collectibles (wines, antiques, coins). The leading category, collectibles, makes up 16.2% of such investments, and art accounts for another 15.9%.