World's rich seek more emerging markets, dividends

Tue Jun 22, 2010 2:55pm EDT
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By Joseph A. Giannone

NEW YORK (Reuters) - The world's wealthiest investors, after cautiously dipping their toes back into financial markets last year, are expected to wade back into emerging markets and seek out high-yielding large company stocks.

In 2009, millionaires moved some of their cash off the sidelines in favor of predictable though thin returns of fixed-income investments, according to the latest Merrill Lynch-Capgemini world wealth report. By the 2009 second half, the rich had regained some appetite for risk, shifting money from home regions toward developing countries with growing economies and higher returns, the report said.

Now, wealthy investors are balancing worries stoked by the 2008 financial meltdown with a desire to find ways to recoup their losses.

"Some people have enough resources that they can put their toe in. Others are probably up to their knees," Merrill Lynch U.S. wealth management chief Lyle LaMothe told reporters at a briefing on Tuesday. "It's still cautious. No one is jumping in wholeheartedly."

In the wake of the financial crisis that hobbled banks and wiped out trillions of dollars of wealth, investors fled to the relative safety of bonds. Globally, 31 percent of millionaire portfolios were tied up in fixed income last year, compared with 25 percent in 2008.

By the end of 2009, stocks and hedge funds had surged from crisis lows, helping millionaire investors globally to nearly regain their previous peaks in wealth. In Asia and Latin America, the wealthy set new highs.


In the coming year and a half, funds are expected to slowly flow back into emerging markets and certain sectors of the stock market.   Continued...