High Net Worth (HNW) Offshore Investment – Drivers and Motivations 2021

Pages: 29 Published: June 29, 2022 Report Code: GDFS0390IA

The offshore wealth management market has surged in the wake of the COVID-19 pandemic, rebounding sharply after the volatility of Q1 2020. New investors have been drawn to the formerly niche market, while the traditional core of the market – HNW investors – have upped their allocations. The pandemic has truly reshaped the offshore investor profile and their behaviors, with the role of Asia Pacific growing as a destination for non-resident investors mainly based in North America and Europe.

The High Net Worth (HNW) offshore investment market research report analyze the drivers behind offshore investments across the wealth pyramid. It examines and contrasts offshore investment preferences across multiple jurisdictions and wealth tiers, providing readers with an in-depth understanding of what is motivating investors to look to offshore booking centers. The report outlines key challenges facing the wealth management industry in 2022, taking into account the impact of inflation, the COVID-19 pandemic, and what this means for the offshore sector.

Key Motivations and Drivers in the HNW Offshore Investment Market

The main driver for offshoring wealth across all affluent groups revolves around better investment management. COVID-19 encouraged more investors to offshore wealth to combat negative portfolio impacts onshore. HNW investors across all regions have historically offshored their wealth for business interests, and although this remained the case in 2021 for the Asia Pacific and Europe, the lead this driver has overall is less significant. Business interests globally remain the key offshore investment driver in the Asia Pacific and Europe. HNW investors have long been seeking out better investment ranges and better returns in offshore financial centers, particularly in the largest offshore markets of Hong Kong (China SAR), the US, and the UK. However, different financial markets and economies are recovering from the impact of COVID-19 at different paces. As a result, the drivers for offshoring wealth show greater variation across markets.

Small-scale investors tend to book their wealth offshore for better returns on a global scale, and this has remained the case in recent years. A wide investment product range is generally a key reason for investors to choose one provider over another. Furthermore, it is a key part of the personalization element customers increasingly want. Highlighting the breadth of an investment product or securities offering is key to winning over prospects both onshore and offshore. At a time where the largest intergenerational wealth transfer is occurring, providers globally need to find more ways to attract the heirs to the throne in order to retain family wealth and attract new clients. The leading reasons for this group to offshore wealth are better returns and better investment product ranges. Wealth managers should be taking into consideration the preferences of Generation Z and millennials, such as digital services, potentially including offshore services as part of their digital proposition.

Key Highlights of the HNW Offshore Investment Market

HNW investors remain the core segment of the offshore market due to the proportion of wealth they offshore, although the rate of offshore investing has increased across all wealth tiers.

Younger, digital-savvy investors are increasingly turning to offshore investments as previous barriers – such as ease of use and high assets under management (AUM) thresholds – are overcome.

COVID-19 travel bans have restricted the size of the expat market, although it remains a key segment of the offshore investor base due to their greater uptake of offshore accounts.

HNW Offshore Investors in the Investment Market

The HNW offshore market share has continued to grow across most markets, with offshore investing expected to surge most in Canada, Australia, Hong Kong (China SAR), the UK, and the US, making them a major source of new business. The pull away from equities continued globally into 2021, and all regions saw a reduction in equities’ share of HNW offshore investment portfolios. A strong majority of private wealth managers in the markets saw an increase in offshoring among their HNW investors, with 2021 seeing a greater proportion of assets offshore than 2019. They also predicted an increase in the proportion of their clients’ assets booked offshore in 2022.

Retail Offshore Investors in the HNW Offshore Investment Market

The COVID-19 pandemic encouraged more offshore investing than in prior years. Regionally, Europe had the lowest amount of offshoring due to well-developed local markets, largely driven by lower rates in the developing markets of Central and Eastern Europe. Latin America generally saw an increase in offshore investing, but this varied from market to market. In Asia Pacific, growth in offshoring was largely precipitated by more developed markets such as Hong Kong (China SAR). From a generational perspective, millennials remain the most inclined to book wealth offshore, as they tend to value an international outlook across their everyday lives.

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Reasons to Buy

  • Understand the growth sectors of the non-resident investor segment in recent years.
  • Identify which offshore investors are gaining market share amid the pandemic.
  • Gain insight into the drivers behind retail and HNW investor offshoring.
  • Forecast HNW demand for offshore wealth management in all key markets.
  • Size of key market segments within the offshore investment market.
  • Examine the effects of COVID-19 on the HNW offshore investment portfolio.

Key Players

  • HSBC

    Citibank

    BNP Paribas

    Standard Chartered

    Goldman Sachs

    Julius Baer

Table of Contents

Table of Contents

1. Executive Summary

1.1 Market overview

1.2 Key findings

1.3 Critical success factors

2. HNW Offshore Investors

2.1 The core HNW offshore segment is growing in most markets

2.2 Portfolio preferences of HNW offshore investors

3. Retail Offshore Investors

3.1 Retail offshore investors are mainly draw from developing market millennials

3.2 While many individuals have offshore accounts, few outside of the HNW client base are worth pursuing

4. Motivations and Drivers

4.1 COVID-19 encouraged more investors to offshore wealth to combat negative portfolio impacts onshore

4.2 HNW investors’ business interests drive them to offshore

4.3 Retail investors are keen to offshore for better returns

5. Appendix

5.1 Supplemental data

5.2 Abbreviations and acronyms

5.3 Definitions

5.4 Methodology

5.5 Secondary sources

5.6 Further reading

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List of Tables

List of Tables

Table 1: Top booking centers for select markets (where HNW investors are expected to offshore more AUM), 2021

Table 2: Selected markets’ rate of offshore investment among general population, 2020-21

List of Figures

List of Figures

Figure 1: Most markets expect HNW investors to increase their offshore portfolio

Figure 2: The HNW expat market is concentrated in the US and other Anglo markets

Figure 3: Indian HNW expats are the single largest nationality in the expat market

Figure 4: Globally, HNW investors favor alternatives over any other asset class

Figure 5: The equity portion of the offshore portfolio dropped considerably due to the pandemic

Figure 6: Offshore investing increased in all regions barring the Middle East and Africa

Figure 7: Offshore investment is a significant part of retail investors’ portfolios in the Americas

Figure 8: Older consumers increasingly turned offshore over the course of the pandemic

Figure 9: Offshore investment is not common among investors outside of the private wealth market

Figure 10: Unlike the onshore market, the small proportion of HNW investors dominate offshore AUM

Figure 11: Expats and individuals returning home are a core component of the offshore market

Figure 12: The connected global economy underpins offshore wealth

Figure 13: The expectation of better returns rose in importance globally in 2021 compared to 2020

Figure 14: All regions continue to favor better returns over other offshore investment drivers

Figure 15: 18-34-year-olds invest a larger proportion of their wealth offshore than any other age group

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