NEW YORK (CNN/Money) – The number of millionaires in the United States grew nearly 10 percent in 2004, trumping the growth rates of high net worth individuals in other regions across the world, according to a report released Thursday.
The total number of U.S. millionaires came to nearly 2.5 million, thanks to strong economic growth, low interest rates, tax relief and solid performances by small- and mid-cap stocks, according to the World Wealth Report from Merrill Lynch and CapGemini.
The report looks at the growth rates and investment strategies of high net worth individuals around the world.
High net worth is defined in the report as having financial assets of at least $1 million, excluding home real estate. Mid-tier millionaires are defined as having $5 million to $30 million in assets.
Worldwide, there are 8.3 million high net worth individuals, or 7.3 percent more than in 2003. Their wealth totaled $30.8 trillion.
Around the world, "the two main drivers of personal wealth creation – economic growth and market capitalization – worked together to generate the strongest growth in high net worth wealth that we've seen in more than three years," said James P. Gorman, executive vice president at Merrill Lynch, in a statement.
Less appetite for risk, real estate
The world's rich grew more cautious with their investments in 2004, adopting a somewhat more conservative asset allocation. Assets in equities declined 1 percentage point, while assets dedicated to fixed income and cash each went up 2 percentage points.
They reduced their exposure to hedge funds as returns in that asset class have fallen, according to the report.
They also reduced their stakes in real estate. Their allocation to real estate declined to 13 percent from 17 percent in 2003.
North America remained the favored region for investment, but concerns over the U.S. dollar reduced the relative amount of assets wealthy foreign investors put into North American markets. North America's share of those assets fell from 48 percent in 2003 to 38 percent.
Well-heeled investors are expected to spread their risks more widely in the years ahead, pumping less money into hedge funds after piling into the $1 trillion sector, and they may put more assets into private equity funds instead.
While the pace of inflows into hedge funds may slacken, however, investors are not expected to flee the sector, said Richard Turnill, chief investment officer of discretionary business at Merrill Lynch, at a media briefing.
"We are seeing some pullback from hedge funds," he said, noting "that is more about the rate of growth than funds being pulled out."
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-- from staff and wire reports