Where rich South Africans put their money

Ultra-high-net-worth (UHNW) South Africans are increasingly turning to private market assets as the public market shrinks, with these assets set to more than double in the next five years.

This is according to Stonehage Fleming private markets partner Richard Hill, who outlined why many UHNW families prefer to invest in private assets.

Hill said private market assets are set to more than double to $12 trillion by the end of 2029.

This growth is being driven by ongoing public company delistings, a shift in institutional and UHNW investor interest towards private investments and a double-digit decline in analyst coverage of public companies.

London-based investment data company Preqin forecasts that the private equity market will experience an annualised growth rate of 12.8% through 2029, based on the $5.8 trillion assets under management at the end of 2023.

“The investment portfolios of the ultra-wealthy reflect this growing interest in private market assets, with UHNW families seeking to capitalise on the growing universe of private versus public market investment opportunities,” Hill explained. 

According to the UBS Family Office Report 2024, these families have, on average, more than a third (34%) of their wealth invested in private market assets.

Preqin attributes this growth in private markets to several factors, including private companies staying private for longer, delistings, lacklustre IPO markets, and an overall decline in the number of listed companies over time.

Public market investment opportunities in South Africa are declining as the JSE faces a spate of delistings. This reduces the number of opportunities that meet institutional investors’ long-term funding needs. 

Over the last few decades, the JSE has been hit with a tide of delistings, going from approximately 850 listed companies in the 1990s to less than 300 today.

In 2024 alone, the delistings of Sasfin Holdings and Bell Equipment reduced the number of listed companies on the JSE from 616 in 2000 to 274.

“Increasingly stringent regulatory requirements imposed on listed companies have also disincentivised companies from going public or remaining listed,” Hill said. 

“While regulating public markets is not necessarily bad because it minimises public market blowups, achieving the right balance between protecting investors and creating an enabling regulatory environment for growth and innovation is difficult.”

Aside from having fewer options in the public markets, performance data also justifies the increasing interest in private assets. 

According to Stonehage Fleming’s research, private markets have significantly outperformed the public markets, with initial capital invested multiplying by 10.4 times between 2000 and 2024.

‘Private markets’ in this context encompasses private equity, growth equity, real assets, and real estate.

Investments in private equity investments, the most significant component of private markets, multiplied by 15.9 times, growth equity 14.4 times, real assets 11.1 times, and real estate 7.6 times. 

This compares favourably with the S&P 500’s 5.7 times growth in initial capital invested since 2000 and the MSCI World Total Return Index’s 4.4 times increase.

“Meanwhile, investors are attracted to the asset class’s lower price volatility than public markets, potentially higher capital returns and/or yield potential, diversification characteristics, potential inflation hedge qualities, and a market environment proving ripe with opportunities,” Hill said.

For UHNW families in South Africa, there are various ways to get exposure to private markets, including private equity funds, real assets, real estate, and private credit. 

However, Hill said entrepreneurial families tend to have an affinity for direct private investments. 

He explained that, besides offering greater capital growth potential, UHNW families also like to have more influence over the strategic decisions and business priorities of the companies in which they invest. 

“These families also tend to have longer, multi-generational investment horizons that are well-suited for private assets, like unlisted companies, that pay off in the longer term,” he said.

“Though information on private companies may not be broadly publicly available, UHNW families looking to invest can get access to higher-quality and more detailed financial information than in public companies.”

This is because private equity managers negotiating the deals typically have a direct line to the CEO and executive management of the private companies seeking external funding.