Switzerland clings on as world’s top offshore wealth centre

A greater proportion of the world's wealth is flowing across borders into Singapore and Hong Kong than Switzerland. [e-mail]

The ultra-rich continue to park more of their wealth in Switzerland than any other country despite Hong Kong and Singapore fast closing the gap on the Alpine nation.

Swiss banks managed $2.4 trillion (CHF2.1 trillion) of assets belonging to wealthy foreigners last year, according to the latest Global Wealth Report published annually by the Boston Consulting Group (BCG).

Hong Kong remains Switzerland’s nearest offshore wealth rival with a $2.2 trillion industry, while Singapore is fast closing the gap with $1.5 trillion of cross-border assets.

A year ago BCG forecast that Hong Kong would overtake Switzerland as the world’s leading offshore wealth centre by the end of 2023. That prediction has now been put back until 2025.

With China imposing a strict Covid-19 lockdown for most of last year, anticipated inflows of Chinese mainland wealth into Hong Kong failed to materialise.

“One of the main reasons for the delay is the slowdown in growth of Chinese assets as well as asset outflows towards Singapore, which is positioned as a ‘safe haven’, closely aligned to the West,” Michael Kahlich, partner at BCG Zurich and co-author of the study, told SWI swissinfo.ch.

Globally, cross-border banking is currently booming in the face of political and economic uncertainty, such as the Ukraine war and rampant global inflation. This resulted in $12 trillion of wealth crossing national borders last year, said BCG.

“Geopolitical tensions and other macroeconomic forces have prompted many investors to shift assets,” said Kahlich.

Banking turbulence

Switzerland booked 4.1% more cross-border wealth from emerging markets compared to 2021 and 2.3% more from developed economies, according to the Global Wealth Report.

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But other locations are proving a more powerful magnet for offshore assets. In the next five years BCG forecasts a 9% annual increase in offshore assets booked in Singapore and 7.6% in Hong Kong compared to 3% in Switzerland. This would result in the Asian booking centres challenging Swiss dominance.

The Swiss banking sector is currently adapting to the collapse of Credit Suisse in March. Wealthy Credit Suisse clients withdrew CHF110 billion in the last three months of 2022 and a further CHF60 billion in the first quarter of 2023.

A report by consultancy group KPMG earlier this month showed that the flow of new client money into 73 Swiss private banks (excluding UBS and Credit Suisse) slowed last year to a third of the volumes witnessed in 2021.

But Kahlich refuses to write off Switzerland, which he believes will retain its attraction to foreign wealth. “Swiss wealth managers continue to set the bar in terms of products offered, investment expertise, and the depth and variety of service offerings,” he said.

Global wealth growing

Financial investments took a battering last year due to adverse economic conditions, according to BCG. But other assets, such as property, boosted the total wealth measured in the report to $459 trillion.

BCG predicts that global wealth will rise to $600 trillion by 2027, with Switzerland’s share tipped to rise to $6.1 trillion.

The wealth of Switzerland rose 2.5% to $5.4 trillion, making the Alpine state the 14^th-richest country in the world when measuring the net worth of its most affluent citizens.

Among this group are 740 super-rich people with assets of at least $100 million, who own a fifth of the country’s financial wealth. The 580,000 Swiss millionaires make up a larger group than the 520,000 millionaires residing in Germany.