The mass affluent and high net worth populations in Indonesia are set to grow in the next three years. Wealth managers should be aware of rising interest in illiquid investments too, says data and analytics firm GlobalData.

The high net worth (HNW) population, defined as those with liquid assets of more than $1 million, is expected to grow at an average of 7.7 percent annually over the next four years: from an estimated 40,400 in 2018 to 51,900 in 2022, said GlobalData in its report «Indonesia Wealth Management: Opportunities and Risks to 2022» released on Monday.

«Growth will be particularly pronounced in the higher wealth bands,» said the report. The number of investors with liquid assets of $3 million to $10 million is forecast to grow at an average annual growth rate (AAGR) of 10.1 percent, and those with liquid assets over $10 million, at 9.3 percent.

Mass Affluent Individuals

The number of mass affluent individuals, defined as those with liquid assets of $50,000 to $1 million, has risen from 943,370 in 2014 to an estimated 1.3 million in 2018, representing an AAGR of 7.3 percent. The number is expected to grow further to 1.5 million in 2022, said the data and analytics firm. 

«Increasing employment levels and strong predicted retail investment growth will further push the rise of affluent individuals in Indonesia over the next four years,» said Global Data wealth analyst Shivani Gupta.

Offshore Investments

Over a quarter (26.8 percent) of Indonesian HNW investors' wealth is held outside the country, mainly due to tax reasons. In 2018, Indonesia's total affluent population -- both the mass affluent and HNW -- accounted for only 0.71 percent of the adult population but held 95.4 percent of total onshore liquid assets.

Indonesian HNW investors hold the bulk (89.9 percent) of their investments in liquid assets such as equities, mutual funds, deposits, and bonds. Deposits remain the top choice among retail investors, accounting for two-thirds of total liquid retail savings and investments in 2018, according to GlobalData.

Expected To Cross $400 Billion

The value of Indonesia's retail savings and investments market has tripled from $108 billion in 2008 to $326 billion in 2018 and is expected to cross the $400 billion mark in 2022.

«However, wealth managers must remain aware of the slowly increasing investments in illiquid assets, with their proportion expected to rise over the coming years,» said the report.