New visionaries and the Chinese Century Billionaires insights 20183 UBS/PwC Billionaires 2018ContentsForeword 5Executive summary 6Section 1: The rise of the new billionaire 10Section 2: Creating wealth and shaping history 16Section 3: Managing family wealth in the 21st century 24Section 4:Looking ahead 28A few words about our research This is the fifth of our reports on billionaire wealth, continuing our investigation into this historic era of wealth generation. This year we have increased our research universe to cover 2,158 billionaires from 43 countries in the Americas, EMEA and APAC, looking back over more than two decades. By comparison, we analyzed 1,550 billionaires from 14 countries last year. Our database includes the 43 largest billionaire markets, which account for around 98% of global billionaire wealth. Further, weve conducted over 25 interviews with billionaire advisors and further face-to-face interviews with more than 30 billionaires and approximately 30 of their heirs. UBS and PwC advise a large number of the worlds wealthy, and have unique insights into their changing fortunes and needs. (For more information see our disclaimer on page 30.)5 UBS/PwC Billionaires 2018A strong year in 2017 saw the worlds billionaires grow their wealth to approximately $8.9 trillion, its highest level in recorded history.This report tells the story of a group of 2,158 individuals and counting. Over the past two centuries their predecessors restless entrepreneurial spirit has given us revolutionary innovations such as the steam engine, the motor car, and the internet. Today, they are themselves at the vanguard of a new industrial revolution which is harnessing the great power of technology to disrupt old industries and create new ones. In the process, they are transforming the global economy and creating jobs and wealth for millions of people around the world.Nowhere is this more visible than in China. Twelve years ago, the worlds most populous country was home to only 16 billionaires. Today, as the Chinese Century progresses, they number 373 nearly one in five of the global total. Our report shines a spotlight on this rapid growth, spurred by innovations in areas such as technology and e-commerce and by a population that is unprecedented in terms of size.Over the next two decades, we will see USD 3.4 trillion of wealth pass on to a new generation. Many of this younger, emerging group are looking to become entrepreneurs in their own right, transforming family businesses into business families. As they do so, they are focusing on making an impact on wider society, through activities such as philanthropy and sustainable investing.The trends we discuss in the following pages are just in their infancy. As billionaires continue to grow in number and evolve, their influence will continue to expand beyond the economy and into tackling some of the biggest challenges facing humankind. We look forward to charting their progress in the years to come.New visionaries and the Chinese CenturyJosef Stadler Group Managing Director Head Ultra High Net Worth UBS Global Wealth ManagementJohn Mathews Group Managing DirectorHead Ultra High Net Worth AmericasUBS Global Wealth ManagementRavi Raju Group Managing DirectorHead Ultra High Net Worth AsiaUBS Global Wealth ManagementNg Siew QuanPartner PwC Singapore, APAC Leader, Entrepreneurial and Private BusinessThomas J HollyPartnerPwC US, US Asset Campden Research. 5. From the family business to business familiesAs the next generation of sons and daughters grows up, there is rising entrepreneurial spirit in billionaire families across the world. The family business is a good starting point. Some 62% of multigenerational billionaires who inherit a family business go on to start further businesses themselves. By comparison, only 42% of those who inherit assets do so. This data shows that keeping the original business can sustain a familys entrepreneurial spirit through the generations.6. New wealth, new impactsWhile sustainable investing is already becoming main-stream, as millennials assume roles in family offices and philanthropic organizations the trend is likely to grow stronger. Showing the enthusiasm for sustainable investing, more than a third (38%) of family offices are now engaged in sustainable investing, and almost half (45%) plan to in crease these investments in the next 12 months.1Looking to the future, 39% anticipate sustainable investing increas -ing still further when the familys next generation takes control. SuccessionLeading 21st Centuryfamilies forwardNew multigenerational families are being created, recognizing the need to plan for succession. In 2017 alone, 44 heirs inherited more than a billion dollars each (56% Americas, 28% EMEA, 16% APAC), totalling USD 189 billion.10 UBS/PwC Billionaires 2018 11 UBS/PwC Billionaires 2018Section 1 The rise of the new billionaire2msci/acwi3Apple, Microsoft Corp, Amazon, Facebook, Alphabet, Tencent Holdings.4As at December 2017.5CHF 1,145 billion (29.12.2017).6PwC Greater China IPO Watch 2017.A new group of self-made entrepreneurs is leading billionaire wealth to fresh highs. As the value of billionaires assets grew by USD 1.4 trillion to USD 8.9 trillion in 2017, the greatest annual increase ever, just 332 new billionaires accounted for more than a third (38%) of the increase. Notably, 199 of them were self-made entrepreneurs, of whom 89 were from China.Growing by almost a fifth (19% compared to 18% the year before), 2017s increase was substantially higher than the average 9% for the past five years. Nonetheless, billionaire wealth underperformed the worlds equity markets the MSCI AC World Index2rose by a quarter (25%). In a year when the indexs top ten stocks dominated its performance, billionaires were bound to underperform. However, it is interesting to note that six of the top ten performers were technology stocks founded by entrepreneurs who subsequently became billionaires.3Three decades of exceptional entrepreneurial activity is creating newly influential families: the new Rockefellers and Rothschilds. Among 2017s new billionaires were 61 heirs. The number of multigenerational billionaires is expected to grow significantly over the forth coming decades.Billionaires in Consumer Massachusetts Institute of Technology, Breakthrough Technologies List (20102018).9World Economic Forum, ”The Fourth Industrial Revolution: what it means, how to respond“, Klaus Schwab, 14 Jan 2016.10Source: China Internet Network Information Center (CNNIC)Just a few entrepreneurs have changed how we live. Whether inventors, executives, business owners or investors, their innovations have brought major benefits to society. As these innovations have been widely adopted, so the entrepreneurs have reaped great financial rewards.Over the last 40 years, almost 80% of the 40 main breakthrough innovations have been driven by people who are billionaires today. Approximately 70% are technology-related and 80% of the companies behind them are based in the Americas, with 20% in APAC.8In technology, for example, todays billionaires have been behind the personal computer revolution, smart phones, the internet and e-commerce, social networking and GPS systems. In medical science, they have pioneered DNA testing and sequencing/human genome mapping. And in renewables they have been driving forces for wind turbines and biofuels. Entrepreneurs are also the architects of todays Fourth Industrial Revolution, blurring the lines between the material, digital and biological worlds.9They are among 2017s 199 new self-made billionaires, almost half of whom are leading Chinas transformation. By our estimation, almost a third (30%) of the 199 accumulated their wealth through innovation and business model disruption, some of them in areas related to accelerating industrial revolution. Yet, many entrepreneurs are also growing businesses through scaling them up, especially in Asias fast-deve l-oping, huge markets such as China, India and Indonesia. As people move to the cities and join the middle classes, so consumer markets are growing quickly. They are easily accessible through e-commerce that breaks down physical distances. Shenzhen challenges Silicon Valley as home of tech innovation In just 30 years, China has evolved from a command economy to challenge the US, the center of capitalism. Remarkably, Chinas government only allowed private enterprise in 1988. Over the past 10 years, private enterprise, typically in the new economy, has played an even greater role in the countrys rapid growth. China has taken over from the US as the place where exceptional wealth is created at the fastest rate. Eighty-nine Chinese entrepreneurs became billionaires for the first time in 2017, three times more than the 30 in the US, which was comparable to EMEAs 34 (however, five of them are Russian, with almost half of these in the mining industry). As Chinas new economy outpaces the old, entrepreneurs are building businesses faster. Seventeen percent of 2017s new Chinese billionaires founded businesses less than 10 years ago; in the US that number was 7%. The country has become a mobile-first nation. Smart-phones are a necessity for everyday life, with 788 million internet users accessing the web via their phones.10Smartphones and the internet have created huge new addressable markets in e-commerce, microcredit and payments. At the same time, the government has prioritized supporting artificial intelligence. A huge population, the invention of the smartphone and government support have made one of historys great moments for new enterprise. 2017s 199 self-made billionaires: From the Fourth Industrial Revolution to pork processingThe 199 self-made individuals who broke into the billion-dollar bracket in 2017 include some of the leading innovators using technology to disrupt the full range of business sectors all over the world. In the US, Chris Larsen is co-founder and executive chairman of Ripple, the San Francisco-based company using blockchain technology to revolutionize the global payments industry. A serial entrepreneur, he co-founded Ripple in 2012 to transform the efficiency of international payments for banks. His wealth is based on his stake in Ripple and his holdings of XRP, the token of Ripple. Previously, he co-founded the online mortgage lender E-Loan, in 1997, and, eight years later, the peer-to-peer lender Prosper. One of Chinas many new billionaires is Wang Jian, a former research fellow at the University of Washington in Seattle, who co-founded BGI, the Shenzhen-based gene-sequencing company. He started BGI in Beijing in 1999, subsequently moving to Shenzhen. BGI has grown into one of the worlds leading gene-sequencing companies, providing researchers and healthcare professionals with high-quality genomic data at rapid turnaround times with competitive pricing. In 2017, Wang Jian became a billionaire when BGI went public. Also in China is Zhang Yiming, who chairs Beijing ByteDance, one of the countrys largest content platforms. Another new joiner is the serial Russian entrepreneur, Pavel Durov, who created the Telegram Messenger app, which reportedly has about 180 million users worldwide.Those who built their businesses through scaling up include Wan Long, the Chinese chairman and CEO of WH Group, the worlds largest pork processor and hog producer. Similarly, Wu Shaoxun chairs Jing Brand, which supplies 180 million liters of Chinese liquor and spirits each year. In North America, Lawrence Rossy, owner of Canadas largest dollar store chain, is another who used scaling up to build a business. 13% (5)16% (6)32% (12)8% (3)16% (6)3% (1)11% (4)3% (1)Financial ServicesConsumer & RetailEntertainment & MediaIndustrialsHealth IndustriesMaterialsReal EstateTechnologyother/diversifiedAmericas 38 billionairesUnited States 30 billionairesEMEA 34 billionairesChina 89 billionaires6% (8)12% (15)22% (28)10% (13)11% (14)5% (6)2% (2)9% (12)23% (29)APAC 127 billionaires9% (3)12% (4)15% (5)3% (1)3% (1)12% (4)29% (10)6% (2)12% (4)10% (3)8% (7)17% (5)13% (12)30% (9)22% (20)0%1% (1)10% (3) 12% (11)11% (10)13% (4) 25% (22)7% (6)3% (1)13% (4)3% (1)Split of 199 self-made billionaires per region and per industry18 UBS/PwC Billionaires 2018 19 UBS/PwC Billionaires 2018Notably, 199 of 2017s new billionaires were self-made entrepreneurs, of whom 89 were from China.