Who said the economic slowdown isn’t affecting millionaires? Growth in the number of millionaires slowed worldwide last year, to 6% from 8.3% in 2006, according to the World Wealth Report, released by Merrill Lynch and Capgemini Jjune 24, 2008.

The U.S. rich took an especially hard hit. The study showed that the population of financial millionaires — those with investable assets of $1 million or more — grew only 3.7% last year. That compares with growth of 9.4% in 2006.

“The many fundamental changes that took place over the past year led to deteriorating economic conditions in key markets, including the U.S. and several mature European nations,” the report stated. In addition to slower growth, millionaires also experienced a shake-up in their portfolios. According to the study, the share of their portfolios devoted to real-estate plunged from 24% in 2006 to 14% in 2007. (We’re not just talking homes here, we’re talking commercial real-estate investments, REITS and other investment properties).

Surprisingly, the report says the real-estate decline was due to profit-taking, not lower values. “In 2006, real estate experienced record returns across various categories. Many investors took profits from these increased valued and moved their money into other asset classes.” In other words, it seems that the rich pulled out of the real-estate bubble earlier than most.

Their also lightened up on alternative investments in 2007 (again, just in time!). They invested only 9% of their money in alternatives, down from 10% in 2006. Their share of equities notched up slightly, to 33% from 31% of their portfolios. Cash and fixed income were the big winners, accounting for a combined 44% of their portfolios, up 9% from 2006. “As the year wore on and financial markets turmoil and economic uncertainty intensified, investors began to retrench, shifting their investments to safer, less volatile asset classes,” the report stated.

As for the future, the World Wealth Report says millionaires will move more money back into alternative investments as markets become less risk-averse. So far that doesn’t seem to be happening. But if it does, the wealthy will likely be first.

Source : Wall Street Journal