Wealth in Denmark: Sizing the Market Opportunity

Wealth in Denmark: Sizing the Market Opportunity

Summary

The outlook is highly positive for the Danish wealth market, with performance over the coming five years set to improve on the previous five. Denmark’s economic position is strong, with impressive private consumption driving economic growth and economic growth in turn driving household saving. The country also has a high current account surplus, which saw it introduce negative interest rates in 2012. While household savings were protected, returns on deposits are minimal. Even so, both deposits and mutual funds continue to attract steady inflows. On the other hand, bond investments are diminishing, and it is a shrinking market for retail investors. The retail non-resident market is small, but does attract participation in Denmark’s equity and bond markets.

This report analyzes Denmark’s wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.

Specifically the report:

Sizes the affluent market (both by number of individuals and the value of their assets) using the Author’s proprietary datasets.

Examines HNW clients’ attitudes towards non-liquid asset classes such as property, commodities, and offshore investments.

Analyzes which asset classes are favored by Danish investors and how their preferences impact the growth of the total savings and investments market.

Evaluates the size of the retail non-resident (offshore) market in Denmark and foreign investors’ preferences.

Scope

The affluent population is rebounding. A compound annual growth rate of 4.5% is forecast between 2018 and 2022, bringing the number of affluent individuals to 1.2 million.

The retail savings and investments market is well developed, with mutual funds and equities accounting for 46.6% of the market in 2017. Notably, historic growth in mutual funds has been driven by inflows, while for equity growth has been performance-driven.

Denmark has the largest covered bond market in the world, which is a particular draw to foreign investors. Non-resident investors accounted for 50.8% of retail bond balances at the end of 2017.

Reasons to buy

Benchmark your share of the Danish wealth market against the current market size.

Forecast your future growth prospects using our projections for the market to 2022.

Identify your most promising client segment by analyzing penetration of affluent individuals in Denmark.

Evaluate your HNW proposition by understanding how the ever-changing tax system affects your HNW clients.

Review your offshore strategy and offering for non-resident investors by learning the dynamics in these markets.

1. EXECUTIVE SUMMARY

1.1. Market summary
1.2. Key findings
1.3. Critical success factors

2. DENMARK’S WEALTH MARKET IS ON THE UP

2.1. Introduction
2.2. An enviable economic position will lead to strong growth for the wealth market
2.2.1. The Danish economy is a strong position, with few headwinds on the horizon
2.2.2. Danes have high levels of personal debt, but higher levels of personal assets
2.2.3. The rebounding affluent population is set to record a CAGR of 4.5% to 2022
2.2.4. The Danish market has a notable emerging affluent segment
2.2.5. Growth in liquid assets will be stronger over the next five years than the previous five
2.2.6. HNW individuals also hold notable assets in less liquid assets, particularly property
2.3. Offshore investments account for just over 12% of total HNW assets
2.3.1. Equities, alternatives, and property account for the majority of offshore wealth
2.3.2. Tax efficiency is a key driver for offshore investment, but Danish authorities are tightening the net on evasion
2.3.3. Denmark also plays an active role in global tax transparency efforts, having signed TIEAs and double taxation conventions with many offshore centers globally

3. DENMARK’S WELL-DEVELOPED RETAIL SAVINGS AND INVESTMENTS MARKET REMAINS BUOYANT

3.1. Introduction
3.2. Total retail savings and investments are set to grow by 5.0% to 2022
3.2.1. The strong investment component of the market aids growth
3.2.2. Mutual funds and equities are set to experience the strongest future growth
3.3. Retail deposit growth has largely been driven by inflows
3.3.1. Deposits continue to attract inflows, despite negative interest rates
3.4. Mutual funds will continue to go from strength to strength
3.4.1. Strong inflows are propelling the market
3.4.2. The mixed allocation of funds buffers investors from the extremes of the stock market
3.5. Equities will continue to grow, but this is contingent on performance
3.5.1. Stock market performance rather than inflows is driving equity growth
3.5.2. The Danish government is introducing tax benefits to further encourage equity inflows
3.6. Bonds will remain a peripheral asset for retail investors
3.6.1. Retail investors are pulling out of bonds

4. AN UNLIKELY OFFSHORE CENTER, DENMARK IS NOT DEVOID OF NON-RESIDENT INVESTMENT ACTIVITY

4.1. Non-resident investments are concentrated in the equity and bond markets
4.1.1. Non-resident holdings accounted for 28% of total retail equity balances in 2017
4.1.2. The world’s largest covered bond market is proving a draw for foreign investors

5. APPENDIX

5.1. Abbreviations and acronyms
5.2. Supplementary data
5.3. Definitions
5.3.1. Affluent
5.3.2. Domicile
5.3.3. Double taxation convention
5.3.4. Emerging affluent
5.3.5. FATCA
5.3.6. HNW
5.3.7. Individual
5.3.8. Liquid assets
5.3.9. Mass affluent
5.3.10. Mass market
5.3.11. Onshore
5.3.12. Residency
5.3.13. Exchange of information
5.3.14. TIEAs
5.4. Methodology
5.4.1. 2018 Global Wealth Managers Survey
5.4.2. Retail Investments Analytics
5.4.3. Global Wealth Model
5.4.4. Exchange rates
5.5. Bibliography

LIST OF TABLES

Table 1: Number of adults in Denmark segmented by asset band (000s), 2006-11
Table 2: Number of adults in Denmark segmented by asset band (000s), 2012-17
Table 3: Number of adults in Denmark segmented by asset band (000s), 2018f-22f
Table 4: Retail liquid assets in Denmark segmented by asset band ($m), 2006-11
Table 5: Retail liquid assets in Denmark segmented by asset band ($m), 2012-17
Table 6: Retail liquid assets in Denmark segmented by asset band ($m), 2018f-22f
Table 7: US dollar exchange rates with the Danish krone

LIST OF FIGURES

Figure 1: Affluent individuals accounted for 22.16% of the adult population by the end of 2017
Figure 2: The mass affluent segment accounts for almost half of retail liquid assets in Denmark
Figure 3: Danish HNWs hold 12.1% of their assets offshore
Figure 4: Denmark is part of the CRS early adopter group
Figure 5: A diversified retail savings and investments market aids growth
Figure 6: The decline of retail bond holdings is the only negative in the savings and investments market
Figure 7: Deposit growth has rallied since 2015, despite low interest rates
Figure 8: Strong inflows have driven consistent growth in the mutual fund market
Figure 9: The Danish mutual fund market is dominated by bond and equity funds
Figure 10: Retail investors in Denmark have been withdrawing assets from the stock market
Figure 11: Healthcare companies make up the majority of the Copenhagen Stock Exchange main index
Figure 12: Retail bond investments have been in decline since 2009
Figure 13: Non-resident investors are primarily drawn to Denmark’s equity and bond markets
Figure 14: Example of a four-input forecasting process