This is how South Africa’s billionaires invest their money

AfrAsia Bank and New World Wealth have released a new report on the wealth management space in Africa, detailing how the South Africa and the continents wealthy individuals invest their money.

“Wealth management” is defined as the provision of banking services to wealthy individuals (HNWIs) and their families. It generally involves: financial planning, inheritance planning and the allocation of client funds.

According to the report, African wealth management market is valued at US$132 billion (R1.7 trillion) (as of December 2016). Around US$76 billion (R1 trillion) of this is held in South Africa.

The report estimates that the African wealth management market will grow by 7% per annum over the next 10 years, with the most promising emerging African markets for private banking being Mauritius and Kenya.

The following table lists the main players in the African wealth management space, ranked by Africa sourced “assets under management” (AuM).

Rank by Africa sourced AuM Base African AuM (US$ Billion)
Investec SA/UK 24
UBS Swiss 8
Nedbank SA 6
Sanlam SA 5
Credit Suisse Swiss 4
Standrd Bank SA 3
ABSA (Barclays Bank) SA/UK 3
Old Mutual SA 2
Momentum Group SA 2
Citadel SA 2

Breakdown of family offices

According to the report, family offices are the fast growing wealth management segment in Africa and throughout the world. Family offices provide a far more personalized service than normal wealth managers. Additional services they offer include: managing household staff, property management, philanthropy coordination and managing family education.

Typically family offices are exclusively for family members and their related trusts, foundations, charities, non-profit organizations and family-related investment vehicles.

In comparison, single-family offices (SFO) generally take the form of a private company that manages the investments and trusts of ultra-wealthy individuals (normally with net assets of more than $100 million) and their extended family. Typically, an SFO has a small team consisting of a lawyer, an investment specialist and an accountant.

Multi-family offices (MFO) are a significant number of families with between $30 million and $100 million in assets that do not have the economies of scale to establish stand-alone family offices. MFOs cater to these families and allow them to share administrative costs. Stonehage Fleming is a notable MFO with a presence in Africa.

Behavioral mapping of HNWIs 

According to NWW’s South Africa 2017 Wealth Report, the country has a total of 40,400 dollar millionaires, and has many as 2,130 individuals with more than R125 million in their account.

The following figure highlights the inclination of different wealth bands in Africa to invest in the various asset classes.

The preference rankings are based on the propensity of a particular wealth band to invest in each asset class when compared with members of the other wealth bands.

As reflected, lower-tier millionaires in Africa have a high propensity to hold cash and residential real estate, while billionaires tend to invest in collectables, commodities and other alternatives assets such as private equity.

Affluent millionaires in Africa are most likely to invest in fixed income products and equities, NWW said.

Read: These 15 cities have the most ultra-rich residents

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This is how South Africa’s billionaires invest their money