Inheritance Overtakes Entrepreneurship as Main Source of New Billionaires’ Wealth

A UBS report reveals a shift in the source of wealth for new billionaires, with inheritance surpassing self-made wealth for the first time.

In a significant shift, a recent report from UBS has found that inheritance has become the primary source of wealth for new billionaires, overtaking entrepreneurship. The UBS Billionaire Ambitions Report 2023 highlights that, out of the $291.5 billion in wealth controlled by the class of new billionaires, $150.8 billion came through inheritance, while $140.7 billion was generated by self-made billionaires. This marks a departure from the past three decades, which witnessed a surge in the number of billionaire entrepreneurs. The report also projects that over 1,000 billionaires are expected to pass on a staggering $5.2 trillion in wealth to their heirs in the next few decades.

1. The Rise of Inherited Wealth:

The UBS report reveals that the number of new billionaires rose sharply this year, with nearly half of the new entrants hailing from mainland China. However, while the number of new billionaires increased, the wealth acquired through inheritance surpassed that generated by entrepreneurship. This trend has been anticipated by wealth managers, as the aging tycoons of the past are now passing on their responsibilities and wealth to their heirs. The report suggests that this shift could lead to the emergence of multigenerational billionaire families.

2. China’s Dominance in New Billionaires:

Mainland China has emerged as a significant player in the billionaire landscape, accounting for a fifth of the global number of billionaires. Furthermore, China represents almost half of the total new billionaires in 2023. The report highlights that the number of new billionaires in China has been steadily rising, reflecting the country’s rapid economic growth and entrepreneurial spirit.

3. Self-Made Billionaires Still Thriving:

Although inheritance has become a major source of wealth for new billionaires, the number of self-made billionaires still surpasses those who inherited their wealth. In the 2023 report, 84 new billionaires were self-made, compared to 53 who inherited their fortunes. While the gap between the two categories has been narrowing, the report indicates that self-made billionaires continue to thrive. Many of them achieved their wealth through organic business growth, with a significant portion attributing their success to initial public offerings (IPOs).

4. Divergent Investment Strategies:

The UBS report also sheds light on the divergent investment strategies of self-made billionaires and those who inherited their wealth. Billionaires who inherited their fortunes showed a preference for private equity investments, with 59% aiming to increase their allocation to direct private equity investments, and 55% planning to invest more in private equity funds. On the other hand, self-made billionaires expressed a greater interest in fixed income investments, with 43% intending to increase their allocations to private debt.

5. Philanthropy and Legacy:

The report highlights the differing attitudes towards philanthropy between first-generation billionaires and those who inherited their wealth. It reveals that 68% of self-made billionaires considered philanthropic goals as a primary objective of their legacy, compared to only 32% of billionaires who inherited their fortunes. The report suggests that successor generations may be more reluctant to gift money they have not earned, and may instead continue with existing family foundations.

Conclusion:

The UBS Billionaire Ambitions Report 2023 provides valuable insights into the changing dynamics of billionaire wealth. The shift towards inheritance as the primary source of new billionaires’ wealth underscores the changing landscape of wealth creation. While entrepreneurship remains a significant driver of wealth, the rise of inherited wealth highlights the importance of succession planning and the potential for the emergence of multigenerational billionaire families. As the number of billionaires continues to grow, it will be interesting to observe how these trends shape the future of global wealth distribution and philanthropy.