Family offices in Africa are expecting strong growth in the value of their assets over the next five years – building on the expansion that’s occurred during the past the past five years – according to new research from specialist service provider to high-net-worth individuals, Ocorian.
Nearly two out of three (65%) family office executives predict dramatic growth over the next five years with a further 30% expecting slight growth. In the past five years 86% say their family office has seen growth in the level of assets, although only 9% reported dramatic growth.
Ocorian’s study among family office professionals working in Nigeria, South Africa, Ethiopia, Kenya, and Tunisia – collectively responsible for around $18,625-billion assets under management – found the growing success of family offices is helping boost their philanthropy.
All family office executives questioned expect the level of philanthropy to increase over the next two years with more than six out of 10 (61%) predicting an increase of 15% or more. Around 70% say donations to diversity, equity, and inclusion giving will increase while 65% say more will be given to healthcare and medical research. Nearly half (49%) say access to clean water and sanitation will be a focus.
Up to 91% say the investment risk appetite of their family office will increase over the year ahead with 67% attributing that to greater regulation around riskier and more specialist asset classes. All questioned agree that increasing investment in alternative asset classes is a growing trend, with 40% strongly agreeing.
There is also a growing trend for family offices to invest in private companies where the family has an interest in or background with 93% agreeing that is driving investment decisions. The next generation of families also have a growing influence on investment decisions at the family office, according to 86% questioned.
“Family offices in Africa are anticipating significant asset growth over the next five years, building on the strong momentum they have experienced recently,” says John Felicite, commercial director at Ocorian. “Healthcare and education remain foundational priorities for African individuals and this resonates with my experience; yet it was surprising to see that 70% of respondents expect increased donations towards diversity, equity, and inclusion causes. This shift prompts interesting questions about what these values will mean in an African context.
“I also reflected on the 86% who say the next generation will have a growing influence on investment decisions,” Felicite continues. “The desire to shape these decisions is clear, but whether they possess the capability to do so effectively is another matter; the next gen, while wanting to influence investment decisions, are not necessarily able to when the patriarch still largely holds the reigns. Influencing investment decisions and the actual ability to make investment decisions are different matters. There are various reasons for this, hierarchy, culture, respect, belief that values will be respected, however, fundamentally all of these are reasons to create the structures for a smooth succession plan and process.
“Addressing succession and legacy can be complex, especially given cultural sensitivities; discussions around estate planning can be challenging where there are taboos about speaking directly of mortality,” he says. “By focusing on building a legacy in one’s lifetime, however, we enable families to create enduring value, benefiting future generations.
“This overall evolution is translating into an intensified focus on philanthropy, a greater appetite for risk, and increased engagement from the next generation – even if they aren’t able to quite make their wishes a reality, yet.”