Investing in the Rich and Famous

11/14/2007 12:00 am EST

Focus: ETFs

Carlton Delfeld

Editor, The La Jolla Letter and Pacific Gains

Carlton Delfeld, editor of Chartwell Advisor ETF Report, finds an exchange traded fund tied to the explosion of wealth around the globe.

Before investors jump to the conclusion that consumer spending is falling off a cliff, check out the data from a recent study of global wealth by Boston Consulting Group.

The US had, by far, the highest number of millionaire households, with nearly 4.6 million, and the highest number of $100-million-plus households, with 2,300. The number of millionaire households increased by a steady 10%, while $100-million-plus households grew by 7%.

The number of millionaire households increased the most last year in China (up 39%),
Spain (up 32%) and Great Britain (up 30.5%). Mr. Carlos Slim of Mexico is likely the wealthiest man in the world with a net worth [that] goes up $52 million a day!

The United Arab Emirates and Switzerland led the ranking for highest density of millionaire households—6.1% of all households in each country, almost nine times the global average.

In Europe, the number of millionaire households grew by 26.4% in 2006, the highest of any region in the study, helped by its strong currency against the weakening US dollar. As of 2006, the US held about 40% of the world's wealth and 50% of its millionaire households, according to the Boston Consulting Group.

Barclays Wealth research also sheds some light on how different nationalities view taking risk as a key reason for their wealth accumulation. The research survey indicates that 84% of investors questioned in South Africa believed a high appetite for risk had helped achieve their riches.

In the UK, only 25% of those surveyed put their wealth down to a willingness to take investment risk. Those surveyed in Singapore, Dubai, and Hong Kong also had a high appetite for risk.

Barclays believed this reflected a “burgeoning entrepreneurial culture” in South Africa, while in the UK, US, and Canada, people were more likely to achieve wealth through inheritance, marriage or a good salary.

This research is important because roughly 60% of total US spending is by the top 20% income earners. Their purchasing power is unlikely to pull back sharply. Second, the growth rate of wealthy individuals from emerging nations is absolutely staggering, and they want the best.

Investors looking for a way to play this trend should consider the Claymore/Robb Report Global Luxury exchange traded fund (ROB). This ETF will hold from 20 to 100 securities of firms that cater to the wealthy, including retailers, manufacturers of automobiles, boats, aircraft, and consumer electronics, travel and leisure firms, and investment and other professional services firms. It currently has 42 firms in its basket and 72% of them are domiciled in the US, France, and Switzerland.

This ETF’s top ten current holdings are DaimlerChrysler, Goldman Sachs Group, LVMH MOET Hennessy Louis Vuitton, Compagnie Financiere Richemont, PPR, Bayerische Motoren Werke AG (BMW), Pernod-Ricard, Christian Dior, UBS, and Credit Suisse Group.

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