Brazil The Future of HNWIs to 2016: The Latin American Giant

`- Brazil The Future of HNWIs to 2016: The Latin American Giant China The Future of HNWIs to 2015: Opportunities for Wealth Managers and Private Banks Publication date: June, 2012 Report WealthInsight. code: WI00048MR This report is a licensed product and is not to be photocopied.

TABLE OF CONTENTS TABLE OF CONTENTS 1 Introduction... 8 1.1 What is this Report About?... 8 2 Executive Summary... 11 3 Wealth Management Fundamentals... 14 3.1 Political Background to Brazil... 14 3.2 Economic Background to Brazil... 17 3.3 Benchmarking Brazil s Wealth in Context... 19 3.3.1 Distribution of wealth... 19 4 Findings from the WealthInsight HNWI Database... 22 4.1 Trends in HNWI Wealth to 2016... 22 4.1.1 HNWI trend analysis... 22 4.1.2 HNWI volume trend analysis... 23 4.1.3 HNWI wealth trend analysis... 24 4.1.4 Per capita HNWI trend analysis... 25 4.1.5 Trends of the wealth bands... 26 4.1.6 Demographic breakdown of HNWI... 28 4.2 UHNWIs... 29 4.2.1 UHNWI volume trend analysis... 29 4.2.2 UHNWI wealth trend analysis... 31 4.2.3 Demographic breakdown of UHNWIs... 32 4.2.4 UHNWIs job titles... 33 4.2.5 UHNWIs industry breakdown... 34 4.2.6 UHNWIs industry performance... 35 4.2.7 UHNWIs breakdown by city... 36 4.2.8 UHNWIs city performance... 37 4.2.9 UHNWIs city forecasts... 39 4.3 UHNWIs billionaires... 41 4.3.1 Billionaire volume trend analysis... 42 4.3.2 Billionaire wealth trend analysis... 42 4.3.3 Billionaire per capita net worth trend analysis... 42 4.3.4 List of Billionaires... 43 4.4 UHNWIs Centimillionaires... 44 4.4.1 Centimillionaire volume trend analysis... 45 4.4.2 Centimillionaire wealth trend analysis... 45 4.4.3 Centimillionaire per capita net worth trend analysis... 45 4.5 UHNWIs Affluent Millionaires... 46 4.5.1 Affluent millionaire volume trend analysis... 47 4.5.2 Affluent millionaire wealth trend analysis... 47 4.5.3 Affluent millionaire per capita net worth trend analysis... 47 WealthInsight. This report is a licensed product and is not to be photocopied. Page 1

TABLE OF CONTENTS 4.6 Core HNWIs... 48 4.6.1 Core HNWI volume trend analysis... 48 4.6.2 Core HNWI wealth trend analysis... 48 4.7 Core HNWIs Mid-Tier Millionaires... 49 4.7.1 Mid-tier millionaire volume trend analysis... 50 4.7.2 Mid-tier millionaire wealth trend analysis... 50 4.7.3 Mid-tier millionaire per capita net worth trend analysis... 50 4.8 Core HNWIs Lower-Tier Millionaires... 51 4.8.1 Lower-tier millionaire volume trend analysis... 51 4.8.2 Lower-tier millionaire wealth trend analysis... 52 4.8.3 Lower-tier millionaire per capita net worth trend analysis... 52 5 Analysis of Brazilian HNWI Investments... 53 5.1 Analysis by Asset Class... 53 5.1.1 Changing trends in liquid assets (equity, fixed income and cash and deposits)... 55 5.1.2 Trends in alternative assets... 57 5.1.3 Trends in Art, Wine and Wheels... 59 5.1.4 Trends of investments in real estate... 61 5.1.5 Trends of investments in cash and deposits... 65 5.1.6 Trends of investments in fixed income... 65 5.1.7 Trends of investments in equity... 66 5.1.8 Trends of investments in business interest... 67 5.2 Analysis of Foreign Investments... 68 5.2.1 Trend of investments in North America... 69 5.2.2 Trend of investments in Latin America and Caribbean... 70 5.2.3 Trend of investments in Europe... 70 5.2.4 Trend of investments in Asia-Pacific region... 70 5.3 Analysis of Brazilian UHNWI Investments... 71 6 The Wealth Sector in Brazil... 73 6.1 Competitive Landscape... 73 6.1.1 Private banks... 73 6.1.2 Wealth managers... 75 6.1.3 Wealth management in each city... 76 6.1.4 Family offices... 77 6.2 Brazil Wealth Management Industry Clientele Model and Maturity... 79 6.3 Behavioral Mapping of Wealth Management and Private Banking Industry in Brazil... 80 6.4 Porter s Five Force Analysis Wealth Management Industry in Brazil... 81 6.5 Financial Services Review... 83 6.6 Case Study: Top-10 Global Private Banks... 85 7 Appendix... 86 7.1 Regulatory Environment in Brazil... 86 7.1.1 Banking regulations... 86 7.1.2 Regulations on Taxes... 86 WealthInsight. This report is a licensed product and is not to be photocopied. Page 2

TABLE OF CONTENTS 7.1.3 Regulations on wealth management and private banking... 88 7.1.4 Regulations related to immigration, investment and employment... 88 7.2 Social Background of Brazil... 88 7.3 Key economic trends and drivers... 89 7.3.1 LC to USD Exchange Rate... 89 7.3.2 Real GDP growth... 90 7.3.3 GDP per capita... 91 7.3.4 Domestic market capitalization... 92 7.3.5 Housing price indices... 93 7.3.6 Commodity index... 94 7.3.7 Foreign direct investment... 95 7.3.8 Investments of FIIs in equity products... 96 7.3.9 Inflation rate... 97 7.3.10 Interest rate... 98 7.3.11 Balance of payments... 99 7.3.12 Government debt... 100 7.3.13 Stock market performance... 101 7.3.14 HNWI wealth to GDP ratio... 102 8 About WealthInsight... 105 WealthInsight. This report is a licensed product and is not to be photocopied. Page 3

TABLE OF CONTENTS LIST OF TABLES Table 1: HNWI Wealth Band and Group Definitions... 9 Table 2: Regions in Brazil... 15 Table 3: Largest 10 Cities in Brazil... 16 Table 4: HNWIs Volume Distribution Wealth Pyramid, 2011... 26 Table 5: HNWIs Wealth Distribution Wealth Pyramid (% Share), 2011... 27 Table 6: UHNWIs Top Sectors for UHNWIs in Major Cities, 2011... 34 Table 7: UHNWIs Top 14 Brazilian Cities for UHNWIs, 2011... 36 Table 8: UHNWIs UHNWI population density in Major Cities, 2011... 38 Table 9: UHNWIs UHNWI Growth Rates for Top 14 Cities, 2007 2016... 40 Table 10: UHNWIs Billionaires Market Overview, 2007 2016... 41 Table 11: Billionaire List, 2011... 43 Table 12: UHNWIs Centimillionaires Market Overview, 2007 2016... 44 Table 13: UHNWIs Affluent Millionaires Market Overview, 2007 2016... 46 Table 14: Core HNWIs Mid-Tier Millionaires Market Overview, 2007 2016... 49 Table 15: Core HNWIs Lower-Tier Millionaires Market Overview, 2007 2016... 51 Table 16: HNWIs HNWI Holdings Growth (%), 2007 2016... 54 Table 17: HNWIs Liquid Asset Composition (%), 2007 2016... 56 Table 18: HNWIs Trends of Investments in Alternative Assets (%), 2007 2016... 58 Table 19: HNWIs Alternative Asset Composition (%), 2007 2016... 58 Table 20: HNWIs Trends in Art, Wine and Wheels, 2007 2011... 59 Table 21: HNWIs Residential Real Estate Prices Per City, 2011... 61 Table 22: HNWIs Foreign Real Estate investment in Brazil, 2007 2016... 62 Table 23: HNWIs Prime International Cities, 2007 2011... 63 Table 24: HNWIs % Foreign Allocation, 2007 2016 X Axis... 68 Table 25: UHNWIs Allocations and Share of HNWI Assets, 2011... 72 Table 26: Largest Private Banks in Brazil, 2011... 74 Table 27: Emerging Private Banks in Brazil, 2011... 74 Table 28: Wealth Manager Asset Allocation in Brazil, 2011... 75 Table 29: Wealth Management Companies Per-City, 2011... 76 Table 30: Family Offices in Brazil... 78 Table 31: Top ten mutual-fund managers in Brazil, 2011... 83 Table 32: Top ten pension-fund managers in Brazil, 2011... 84 Table 33: Top-10 Private Equity Firms in Brazil, 2011... 84 Table 34: Top 10 Private Banks by Global AuM and New Money (US$ Billion), 2011... 85 Table 35: LC to USD Exchange Rate, 2006 2016... 89 Table 36: Real GDP Growth, 2006 2016... 90 Table 37: GDP Per Capita, 2006 2016... 91 Table 38: Domestic Market Capitalization, 2006 2011... 92 Table 39: Housing Price Index, 2006 2011... 93 Table 40: Commodity Indices, 2006 2016... 94 Table 41: Foreign Direct Investments, 2006 2016... 95 Table 42: Investments of FIIs in Equity Products, 2006 2010... 96 WealthInsight. This report is a licensed product and is not to be photocopied. Page 4

TABLE OF CONTENTS Table 43: Inflation Rate, 2006 2016... 97 Table 44: Money Market Rate, 2006 2016... 98 Table 45: Balance of Payments, 2006 2011... 99 Table 46: Government Debt to GDP, 2006 2016... 100 Table 47: Stock Market Performance, 2006 2011... 101 Table 48: HNWI Wealth vs. GDP Ratio, 2007 2016... 102 Table 49: Appendix One... 103 Table 50: Appendix Two... 104 WealthInsight. This report is a licensed product and is not to be photocopied. Page 5

TABLE OF CONTENTS LIST OF FIGURES Figure 1: HNWI Wealth Band Definitions... 10 Figure 2: Asset Price Performance, 2007 2011... 19 Figure 3: Brazilian HNWI Performance, 2007 2016... 20 Figure 4: HNWI Brazil vs the World... 21 Figure 5: HNWIs Growth Factor Correlation, 2007 2011... 22 Figure 6: HNWIs Volume by Wealth Band, 2007 2016... 23 Figure 7: HNWIs Wealth by Wealth Band (in US$ Billion), 2007 2016... 24 Figure 8: HNWIs Per Capita Net Worth (in US$ Million), 2007 2016... 25 Figure 9: HNWIs Volume Distribution Wealth Pyramid, 2011... 26 Figure 10: HNWIs Wealth Distribution Wealth Pyramid (% Share), 2011... 27 Figure 11: HNWIs Age Distribution, 2011... 28 Figure 12: UHNWIs Wealth Share vs Volume Growth, 2007 2011... 29 Figure 13: UHNWIs Volume by Wealth Band, 2007 2016... 30 Figure 14: UHNWIs Wealth by Wealth Band (in US$ Billion), 2007 2016... 31 Figure 15: UHNWIs Age Distribution (% Share), 2011... 32 Figure 16: UHNWIs Job Titles, 2007 2011... 33 Figure 17: UHNWIs Distribution by Industry, 2011... 34 Figure 18: UHNWIs Sector Performance, 2007 2011... 35 Figure 19: UHNWIs City Performance, 2007-2011... 37 Figure 20: UHNWIs Regional Forecasts, 2011 2016... 39 Figure 21: UHNWIs Billionaires Market Overview, 2007 2016... 41 Figure 22: UHNWIs Centimillionaires Market Overview, 2007 2016... 44 Figure 23: UHNWIs Affluent Millionaires Market Overview, 2007 2016... 46 Figure 24: Core HNWIs Mid-Tier Millionaires Market Overview, 2007 2016... 49 Figure 25: Core HNWIs Lower-Tier Millionaires Market Overview, 2007 2016... 52 Figure 26: HNWIs Asset Class Composition, 2007 2016... 53 Figure 27: HNWIs Changing Trends in Total Liquid Assets (as a Percentage of Total Assets), 2007 2016... 55 Figure 28: HNWIs Trends of Investments in Alternative Assets (in US$ Billion), 2007 2016... 58 Figure 29: HNWIs Trends in Art, Wine and Wheels, 2007 2011... 59 Figure 30: HNWIs Foreign Investment Allocation and Growth by Asset Class (%), 2011 2016... 68 Figure 31: HNWIs Global Distribution of Foreign Investments, 2007 2016... 69 Figure 32: UHNWIs Asset Class Composition, 2007 2016... 71 Figure 33: Wealth Management Industry in Brazil Maturity Level of Players... 79 Figure 34: Brazil Wealth Management Industry Behavioral Mapping, 2011... 80 Figure 35: Wealth management industry in Brazil Five Forces Analysis... 81 Figure 36: LC to USD Exchange Rate, 2006 2016... 89 Figure 37: Real GDP Growth (%), 2006 2016... 90 Figure 38: GDP Per Capita, 2006 2016... 91 Figure 39: Domestic Market Capitalization, 2006 2011... 92 Figure 40: Housing Price Index, 2006 2011... 93 Figure 41: Commodity Indices, 2006 2016... 94 Figure 42: Foreign Direct Investments, 2006 2016... 95 WealthInsight. This report is a licensed product and is not to be photocopied. Page 6

TABLE OF CONTENTS Figure 43: Investments of FIIs in Equity Products, 2006 2010... 96 Figure 44: Inflation Rate, 2006 2016... 97 Figure 45: Money Market Rate, 2006 2016... 98 Figure 46: Balance of Payments, 2006 2011... 99 Figure 47: Government Debt to GDP, 2006 2016... 100 Figure 48: Stock Market Performance, 2006 2011... 101 Figure 49: HNWI Wealth vs GDP Ratio, 2007 2016... 102 WealthInsight. This report is a licensed product and is not to be photocopied. Page 7

INTRODUCTION 1 Introduction 1.1 What is this Report About? This report is the result of WealthInsight s extensive research covering the high net worth individual (HNWI) population and wealth management market in Brazil. It provides a market overview and forecast of the HNWI population and HNWI wealth across asset classes. By utilizing the WealthInsight HNWI Database, it also provides information on HNWI across demographic factors. For the purposes of this report, the phrase coverage period refers to the period of 2007 2016, while the review period relates to the years 2007 2011 and the forecast period relates to the years 2011 2016. This report categorizes the Brazilian HNWI population across five wealth bands that are defined in Table 1, and analyzes HNWI wealth investments across asset classes and geographical regions. To provide a comprehensive analysis of HNWI wealth, wealth in this report is defined as the net value of assets, which includes both financial holdings and tangible assets. Financial holdings and tangible assets include alternative assets, real estate (excluding the primary residence), cash and deposits, fixed-income, equities and business interests. WealthInsight. This report is a licensed product and is not to be photocopied. Page 8

INTRODUCTION Table 1: HNWI Wealth Band and Group Definitions Wealth Band Billionaires Centimillionaires Affluent Millionaires Mid-Tier Millionaires Lower-Tier Millionaires Wealth Group HNWIs UHNWIs Core HNWIs Definition Billionaires are those HNWIs with wealth of US$1 billion or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Centimillionaires are those HNWIs with wealth of between US$100 million and less than US$1 billion, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Affluent millionaires are those HNWIs with wealth of between US$30 million and less than US$100 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Mid-tier millionaires are those HNWIs with wealth of between US$5 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Lower-tier millionaires are those HNWIs with wealth of between US$1 million and less than US$5 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Definition The high net worth individuals (HNWIs) wealth group comprises all wealth bands. It represents those individuals with wealth of US$1 million or more, including equities, bonds, cash and deposits, fixedincome products, real estate, alternative assets and business interests. The ultra high net worth individuals (UHNWIs) wealth group comprises the billionaire, centimillionaire and affluent millionaire wealth bands. It represents those individuals with wealth of US$30 million or more, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. The core HNWIs group comprises the mid-tier millionaire and lower-tier millionaire wealth bands. It represents those individuals with wealth of between US$1 million and less than US$30 million, including equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Source: WealthInsight WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 9

INTRODUCTION Figure 1: HNWI Wealth Band Definitions Source: WealthInsight WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 10

ABOUT WEALTHINSIGHT 2 About WealthInsight WealthInsight provides detailed data and insightful analysis on the world's HNWI and wealth sector. With decades of experience providing business information, WealthInsight helps organizations to make informed decisions and win new business. At WealthInsight's core is our proprietary HNWI Database of the world's wealthiest individuals. Around this database we have built a number of valuable research-based products and services that make WealthInsight much more than just a rich contact list. We work with and provide solutions for: Wealth managers Private banks Family offices Technology providers Professional services consultants, accountants, lawyers and real estate professionals Fund managers, hedge fund managers, asset managers, venture capitalists Non-profit and educational institutions WealthInsight s corporate headquarters are located in London, with offices in New York, San Francisco, Sydney, Seoul and Hong Kong. For more information on WealthInsight please visit www.wealthinsight.com Reports WealthInsight publishes high-quality research reports focused on the wealth sector. The reports provide comprehensive analysis of countries, regions and special topics. With the HNWI Database as the foundation for its primary research and analysis, WealthInsight is able to obtain an unsurpassed level of granularity, insight and authority on the HNWI universe in each of the countries and regions covered. All reports are available as a part of the WealthInsight Intelligence Centre. Reports can also be purchased on a subscription or one-off basis. Every WealthInsight report is uniquely formulated for the region, country or topic covered. Key features of the reports include: Market sizing Forecasting Benchmarking HNWI asset allocation Behavioral mapping Family offices WealthInsight. This report is a licensed product and is not to be photocopied. Page 11

ABOUT WEALTHINSIGHT Methodology WealthInsight s team of in-house analysts devise and collect data over a historical period of five years and develop forecasts for a five-year forecast period. All WealthInsight Wealth Reports are rigorously sourced and created according to a comprehensive methodological process: Internal audit Review of in-house databases to gather existing data: Historic market databases and reports HNWI Database Wealth management, private bank and family office database Financial deals and news archive Secondary research Collection of the latest market-specific data from a wide variety of industry sources: Government statistics Industry associations Company filings Broker reports International organizations Primary research Review of the latest wealth management and private banking industry trends Surveys using panels compiled from across the wealth sector: Wealth management and private banking professionals Financial services experts High net worth individuals Expert opinion Collation of opinion taken from WealthInsight interviews of leading industry experts Analysis of third-party opinion and forecasts: Broker reports Industry associations Wealth management and private banking media Official government sources Leading academic research and commentary Data consolidation and verification Consolidation of data and opinion to create historical datasets Creation of models to benchmark data across sectors, asset classes and geographies Market forecasts Feed of forecast data into market models: Macroeconomic indicators Industry-specific drivers WealthInsight. This report is a licensed product and is not to be photocopied. Page 12

ABOUT WEALTHINSIGHT Analysis of the WealthInsight HNWI Database and Wealth sector company databases to identify key trends: Latest wealth trends Key drivers of the wealth management industry Report writing Analysis of market data Discussion of company and industry trends and issues Integration of survey results Annual review of financial deals and wealth management trends Standardization of market definitions using recognized industry classifications Quality control Peer review Senior-level QC Random spot checks on data integrity Benchmark checks across databases Market data cross-checked for consistency with accumulated data from: Internal databases Company filings Notable contributors to this report: Andrew Amoils Senior Analyst and Head of Reports Team, WealthInsight Shekhar Tripathi Senior Analyst, WealthInsight Sunil Kumar Agarwal Analyst, WealthInsight WealthInsight. This report is a licensed product and is not to be photocopied. Page 13

ABOUT WEALTHINSIGHT WealthInsight. This report is a licensed product and is not to be photocopied. Page 14