Billionaires and ultra-wealthy investors weather the inflation storms

Despite a sustained period of higher outgoings, the world's billionaires and ultra-rich have grown wealthier. Photo by Getty Images/iStockphoto

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Inflationary shocks have reverberated around the globe over the past three years but the world’s wealthy have largely weathered them, say private bankers and investment managers.

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Despite a sustained period of higher outgoings — with headline annual inflation still at 3.5 per cent in the U.S. and 2.4 per cent in the eurozone after hitting multidecade highs two years ago — the world’s billionaires and ultra-rich have grown wealthier, according to U.S. media group Forbes.

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Industry figures say the rich have shielded their wealth from inflation by investing in the tech-driven stock boom, which has outpaced the rise in the cost of living, and by making smart bets on private equity, debt and infrastructure that have delivered strong returns.

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“Wealthy individuals and their families are sophisticated investors, like hedge funds, that have been part of the stock market rally,” said Hannes Hofmann, global head of the family office group at Citi Private Bank.

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“They were affected by the cost of living crisis, but many of the big family offices that manage the wealth of the rich have invested wisely in stocks, bonds and private equity.”

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The wealthy continued to spend despite inflation being higher for goods and services that are largely bought or used by the rich compared with broader consumer prices.

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Forbes’ annual cost of living extremely well index (CLEWI), which tracks spending on items such as opera tickets, exclusive school fees, and luxury cars, rose higher than U.S. consumer prices last year.

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The CLEWI climbed 4.9 per cent in 2023 — above the 3.4 per cent rise in U.S. consumer price index (CPI) in the same period — following increases of seven per cent in 2022 and 10.1 per cent in 2021.

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Yet this failed to halt the rise in total wealth among the world’s richest people. Forbes’ worldwide billionaire index, published in April, showed that the total wealth of the richest people around the globe had risen to a record US$14.2 trillion in 2024, a 14 per cent increase on the US$12.2 trillion recorded at the same point in the previous year.

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The richest 400 people in the U.S. also saw their wealth jump significantly higher than inflation in 2023, with the average net worth of the Forbes 400 wealthiest Americans up 13 per cent, to US$11.3 billion, year on year.

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“Ultra-high net worth individuals are not that exposed to inflation, as their portfolios are usually well diversified,” said Alessandro Caironi, head of banking, lending and investment solutions at Deutsche Bank Private Bank. “They hold investments such as public and private equity and real estate that protect them.”

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Rebecca Gooch, global head of insights at Deloitte Private, a division of the consultancy group, said, “With inflation showing signs of moderation, it is no longer the No. 1 worry for the wealthy. They are now more concerned about geopolitics (with wars in the Middle East and Ukraine) and global economic uncertainty.”