The African region offers one of the most promising avenues in the private wealth space, says Guillaume Passebecq, Head of Private Banking at Bank One, based on perspectives shared in its latest Investor’s Circle Market Outlook video released in January 2022 and recent reports that the African private wealth boom is second only to Asia, offering grounds for optimism in the Private Banking space in Mauritius and Africa.
Fresh from winning the coveted title of “Best Private Bank in Mauritius” at the seventh annual edition of the World’s Best Private Banks Awards by Global Finance – a title that we have previously held for 4 consecutive years from 2017 to 2020 – Bank One is now looking at 2022 with equal optimism to take forward its innings in the Private Banking space in Mauritius and Africa.
It is here that we would like to share our insights into private wealth in the region for the year unfolding before us, and for this purpose, we would also like to put forward the expert views recently gathered for our latest Investor’s Circle Market Outlook video, for which we were joined by several senior spokespersons from the asset management space.
To explain more about Investor’s Circle, it started off as a biannual networking event aimed at bringing together private investors, institutions, asset managers and financial service providers. Launched as the island’s first B2B platform for finance professionals, it allows players from our industry to connect, exchange ideas and address shared challenges. As we adjusted to the new normal in the wake of the COVID-19 pandemic, Investor’s Circle moved away from face-to-face events to a series of online video interviews.
While presenting the views of our key partners who have shared with us the future they see for financial markets and how they are investing to prepare for it, we feel it is incumbent upon us to also point out the risks that any discerning investor should consider. Therefore, while we do have an optimistic view of the investment landscape in the region, there are nevertheless some necessary nuances to our optimism – among which waves of worry emanating from COVID-19, rising inflation, the US Federal Reserve’s policy decisions, materials shortages, and rate hikes are definitely key risks to consider.
However, despite these risks, we firmly believe that the stage is set to strike a better balance this year. We are pleased to set out the areas we are bullish on for 2022, and the challenges we feel must be circumvented to truly leverage the potential of private wealth in the region for the coming year.
Geographic focus: Africa ahead
First of all, our own experience strongly echoes the views of Louis Lallia, Head of Client Coverage at the Mauritius-based asset manager and stock broker AXYS, who formed part of our panel of experts for our latest edition of Investor’s Circle. He believes that Africa is becoming a hot topic in the financial markets for its investment potential and that the undervalued businesses on the continent are likely to give investors the best returns, if only they are discerning enough to select the right ones.
He underlines that, “COVID isn’t over yet – with the supply chain issues it has caused continuing to push inflation. After a decade of bull markets, we do look and try to find undervalued markets. We see Africa as a great place to invest this year. African businesses are generating above average returns and are still undervalued compared to the rest of the world.”
He goes on to rue that the fixed income segment has been most challenging, with one of the worst quarters in nearly 30 years - but while it may be difficult to find good investments in such a low interest rate environment, it is by no means impossible. Despite the risk of inflation and the low interest rate environment, he notes that the private credit space can be richly rewarding with investments that just need to be found out.
Segment focus: Asset allocation to emerge as holiest of holy trio
Meanwhile, another expert speaker, Didier Margetyal, Managing Director and Fund Manager at Tailor Asset Management, notes that from a sectoral perspective - of the holy trio of bond management, equity management and asset allocation – the private wealth space is likely to see asset allocation play the most crucial role in 2022.
He highlights that their fund is approaching the new year with “cautious optimism” – with optimism induced by global growth remaining on track after a record year in 2021, notably due to the investment programmes put in place by governments, corporate profits being on track and the distribution of added value starting to rebalance in favour of wages, consumption and therefore long-term growth; while liquidity remains abundant and investors seek pullbacks to serve as entry points.
Meanwhile, a note of caution must be struck as a consequence of the US Fed poised to raise interest rates several times in the year and Central Banks reducing their balance sheets; the possibility of a hard landing for the Chinese economy amid reduced trust in real estate players and now the spread of this distrust to other sectors too; the high likelihood of Russian troops invading Ukraine (since realised) and how oil prices are certain to go up in such an eventuality, further shoring up inflation.
He concludes on the note that these opportunities and challenges clearly set the path forward in terms of a defensive asset allocation strategy where investors entrust investment professionals with the task of managing their strategic and tactical exposure to different asset classes.
Rounding it up: Africa on the edge of a promising private wealth future
At Bank One, with our roots firmly in Mauritius as a springboard to Africa, we strongly believe that the region offers one of the most promising avenues in the private wealth space.
According to Knight Frank’s Wealth Report 2021, the African private wealth boom is second only to Asia and the continent can expect to see the second biggest regional five-year UHNWI growth rate – 33% – led by Zambia (40%) and South Africa (32%). Furthermore, the outlook for households earning more than US$100,000 a year is even more positive according to Oxford Economics, which is forecasting 139% growth over the same period. Meanwhile, the Global Wealth Report 2021 by Credit Suisse foresees Africa growing robustly, and at roughly the same rate as the leading economies of China and India, when it comes to wealth gain by emerging economies.
Based on our optimism for the private wealth landscape in Africa, together with the views of our experts that resonate strongly with our own insights into the space, we believe that the only way for private wealth in the continent to go is up.