Global Business - Private Wealth Intermediaries - Bhumishq

Global Business

PRIVATE

WEALTH SPVs

Explore how Bhumishq supports private
wealth intermediaries in the Mauritius IFC.

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Bhumishq

 

PRIVATE WEALTH OPPORTUNITY

It is estimated that Africa is home to around 165,000 high net worth individuals(HNWIs) with a combined wealth holding of US$860 billion and this number is set to increase at a rate of 7% as a result of continuous economic development and urbanisation.

Mauritius is well positioned to become Africa’s IFC of choice for private wealth. Industry players will have an opportunity to capture a market share of US$ 300 billion addressable from about 50,000 ultra-high networth individuals and witnessing a constant growth rate of 7% per annum.

MARKET ANALYSIS

Total Available
Market (TAM)

Serviceable Available
Market (SAM)

Target MarketMarket
Share

TOTAL AVAILABLE
MARKET (TAM)

Total Available Market (TAM) size is about US$ 860 billion addressable from 165,000 ultra-high networth individuals (UHNIs) in Africa. The growth is estimated at 7% per annum.

SERVICEABLE AVAILABLE
MARKET (SAM)

The Serviceable Available Market (SAM) size will be about 90% of the TAM as less than 10% represent US$ 100 million plus and US$ 1 billion plus fortunes who already have access to global private wealth service providers.

The SAM is estimated at ~774 billion from ~ 148,000 UHNIs.

TOTAL MARKET

The Target Market will be 80% of the SAM since 20% of the SAM will be loyal to their existing private wealth institutions, especially in South Africa. Also, some will diversify their portfolios especially with Asian value propositions.

The Target Market is estimated at ~ 619 billion from ~ 118,000 UHNIs.

MARKET SHARE

As the Mauritius IFC develops its value propositions and sustainable competitive advantage offerings, it can capture ~ 50% of the Target Market.

The Market Share is estimated at ~ US$ 300 billion from ~ 59,000 UHNIs.

 

Mauritius IFC Contribution

Private banking and wealth management is the IFC’s third-largest sector, with a banking revenue pool of US$94 million, AUM of US$8.2 billion, and approximately 300 full-time employees (FTEs).

Private banks provide traditional banking regulated by the Bank of Mauritius (BOM) and more complex wealth management services regulated by the FSC to HNWIs:

Traditional banking: Deposit taking (~50% of AUM), personal lending and credit cards.

Wealth management: Custodial services, portfolio management and investment advisory services.

Regional Opportunity

Private banking and wealth management for the region is a major opportunity, offering potential growth of 7-8% p.a. to create a US$20 billion revenue pool by 2030. A particularly interesting growth segment is HNWIs, i.e., entrepreneurs, industrialists and family business owners increasing their wealth.

The Mauritius IFC Platform opportunity

Its compelling value proposition for private banks, wealth managers and HNWIs place Mauritius in an ideal position to capture significant share of this market, as it offers free capital flows and hard currency investment options; a strong regulatory framework and efficient tax structure for wealth placement; a wide range of investment structures with deep expertise in fund administration, and the potential to build greater links with the investor services eco-system that could provide cross-sell opportunities for HNWIs already using Mauritius; the potential to build a distinctive proposition on the well-established tourism industry; a stable political climate and economy.

Furthermore, the Mauritius IFC is encouraging additional opportunities in capital markets (building the leading multi-asset class, multi-currency, exchange for regional mid-size corporates), captive insurance, asset management, reinsurance, fintech, cryptocurrency exchange, and Islamic banking (cross-border Maharajah finance and Sharia-compliant trusts).

VALUE PROPOSITIONS OF THE MAURITIUS IFC AS AFRICA’S LEADING PRIVATE WEALTH MANAGEMENT HUB

Fund Management

The large and growing pools of wealth in Africa are creating an increasingly urgent need for specialist fund management services.

Both institutions and high-net-worth individuals are looking for regionally based experts to address their complex investment requirements.

The Mauritius IFC’s legislative and regulatory regime provides a highly supportive and secure environment for local, regional and global players to domicile, manage and distribute funds.

Asset Management

Growing wealth, a maturing insurance industry and institutional investor demand are creating new opportunities in asset management across the African region.

Sitting at the heart of Africa’s financial services industry, the Mauritius IFC provides the ideal platform for firms to develop, distribute, manage and domicile all types of public, private and qualified funds.

The Mauritius IFC’s world-class legal and regulatory structures balance efficient setup with oversight that gives investors’ confidence in asset management products. It also offers direct access to institutional and high-net-worth individuals looking to access both conventional and alternative investment products.

Wealth management

Personal and family wealth continues to grow rapidly across Africa driving increasing demand for wealth management services.

Individuals and families require all types of wealth solutions. Interest is particularly strong in investment and portfolio management, estate and inheritance planning, and real estate and financial advisory.

The Mauritius IFC stands apart with its platform to serve these regional customers. It combines a large ecosystem of specialist professional services providers, a location at the centre of the region’s financial services industry, and a legal and regulatory environment designed to address the needs of individuals, families and institutions.

Private Equity

Family firms and conglomerates, meanwhile, are reaching a size and complexity that benefit from the capital and management expertise offered by private equity.

At the same time, many industries and sectors are fragmented, ideal for the consolidation that is well served by private equity. Governments are turning to public-private partnerships, representing yet another private equity opportunity.

An expanding appetite from institutions and high-net-worth individuals looking to diversify their portfolios with Africa-focused private equity is creating an investor base for regionally themed funds.

With its location at the heart of deal making in the region, the Mauritius IFC offers the ideal platform for firms looking to meet this need, as they launch or expand operations in the region.

Additionally, the Mauritius IFC’s fund structures and licensing options are ideally suited to private equity, creating a unique regional platform to launch, distribute, manage and domicile all types of private equity funds.

Brokerage

Emerging market equity exchanges, in South Asia (MEASA) region, are attractive for Africa. Long-term structural change means they are representing an ever-larger share of global equity capitalisation. This shifting reality is creating new opportunities for brokerage firms with operations in the region.

The Mauritius IFC offers brokerage operations the region's most advanced telecommunications, IT and regulatory infrastructure, allowing them to optimally access and serve markets and exchanges across Africa and South Asia. The Mauritius IFC-based brokerage operations have direct access to the large market of family offices, private banks, investment advisors and investment banks from the African regions.

By establishing operations in the Mauritius IFC, regional and international brokerage firms can centralise and consolidate the resources used to service the region, thereby gaining a competitive cost of operation.

Capital markets solutions

Positive change is underway in capital markets across Africa. Efficient capital allocation is increasingly the priority. No longer are corporates only looking to self-funding or bank loans to finance growth. Nor are governments reflexively shouldering the whole burden of capital spending.

Companies are increasingly tapping equity and debt markets, while governments are looking to asset privatisations, public-private partnerships and debt financing to fund infrastructure and social development projects. The result is a vibrant landscape that demands the full range of capital market products and services.

The Mauritius IFC offers the ideal platform to deliver capital market solutions to clients across the African region from a tried and tested, globally recognised common-law jurisdiction that serves a vast region stretching from Asia to Africa. Firms benefit from the Mauritius IFC’s unrivalled status as the region’s financial hub and epicentre of deal making initiatives.

Private banking

The region continues to represent some of the fastest growing areas of wealth accumulation in the world. As a result, high-net-worth and ultra-high-net-worth individuals and families require sophisticated wealth management solutions that are ideally served by private banks. Not only is the Mauritius IFC at the heart of regional banking and financial deal making, but it also offers the most established legal and regulatory environment of its kind and a structure specifically suited to the unique needs of private banking operations. The fast-growing financial ecosystem in the Mauritius IFC also provides an unrivalled mix of professional services providers and experts. They provide capital market, wealth management, investment banking, and alternative investment services.

SPVs for cross-border wealth management structures

The Mauritius IFC is the leading IFC between Asia and Africa. It provides the most flexible and robust licensing and regulatory environment in Africa. It also offers an ecosystem with direct access to expertise and facilities that are essential for management offices, holding companies, proprietary investment companies, intermediate special purpose vehicles, special purpose companies and family offices inter alia.

Trusts

A trust is a good legal entity to ring fence and protect assets. It also acts as an inheritance or succession platform. Typically, the Settlor vests property in a trust managed by a trustee (that thus has the legal ownership of the property) for the benefit of a beneficiary (who has the beneficial interest in the property).

Generally, trust properties are shielded from insolvency and bankruptcy risks. A Mauritian trust does not need to be registered, in which case, the trust deed is a private and confidential document and subject to strict confidentiality norms. Trusts will require to file financial summaries to the FSC. Most of the time, trust income constitutes dividends and capital gains that are tax exempt and sometimes interests on loans that will be entitled to partial exemption and thus be taxed at 3% if derived from a foreign establishment. Any other income will be charged at 15%. No statutory licensing or registration fees will be applicable.

Foundations

A foundation is similar to a trust. A founder vests property in a foundation for the purpose of charitable or non-charitable benefits. A foundation is managed by a Council. A foundation is registered at the Registrar. Most of the time, foundation income constitutes dividends and capital gains that are tax exempt and sometimes interests on loans that will be entitled to partial exemption and thus be taxed at 3% if derived from a foreign establishment. Any other income will be charged at 15%.

Family Offices

The Overseas Family Office scheme caters for the domiciliation of assets and wealth of high networth families in Mauritius. The scheme consist of two licenses, one for single family office and the other for multi-family offices.

To be eligible for a license, each family will be required to domicile and actively manage a prescribed minimum investible and liquid wealth base of US$ 5 million. The family office will also be required to maintain, at all times, its physical establishment in Mauritius, as well as other substance requirements.

Under the scheme, family offices will benefit from a tax holiday of 5 years and family members will benefit from residency schemes as well as the eligibility to acquire immovable properties in Mauritius.

The family office takes the form of a private limited company. The statutory fees are as below:

  • USD 1,000 as one-off processing fees and USD 2,500 as annual fees payable to the FSC and USD 275 payable annually to the CBRD.
  • USD 1,000 as one-off processing fees and USD 2,500 as annual fees payable to the FSC for the first family and USD 500 as one-off processing fees and USD 500 as annual license fees for each additional family payable to the FSC and USD 275 payable annually to the CBRD.

Asset and Fund Managers

The new Fund and Asset Manager Scheme provides mid to big size fund and asset managers with the incentive to establish their management offices especially for their African portfolio in the Mauritius IFC.

The activities of the managers comprise advisory, investment management and asset management services. The incentive will be available to holders of Assets Management License and CIS (Collective Investment Scheme) Manager License.

The Fund and Asset Managers are issued with either an Asset Manager certificate, a Fund Manager certificate, or an Asset and Fund Manager certificate by the FSC.

Such professionals will have to manage assets worth more than US$ 100 million. They will be entitled to a 5 year tax holiday on their emoluments.

Ultra-High Networth Individuals

It is estimated that Africa is home to around 165,000 high net worth individuals(HNWIs) with a combined wealth holding of US$860 billion and this number is set to increase at a rate of 7% as a result of continuous economic development and urbanisation. The Mauritius IFC has developed a scheme to attract ultra-high networth individuals notably from Africa.

  • 5 years tax holiday to a non-citizen of Mauritius who makes investment in Mauritius of more than USD 25 million on or after 01 September 2016.
  • 5 years tax holiday to companies wholly owned by non-citizens of Mauritius which make investment in Mauritius of more than USD 25 million.

Asset Management

Enabling legislation: s.14 of the Financial Services Act 2007.

Statutory Fees:

  • One-off processing fees to the FSC: US$ 1,000
  • Annual statutory fees to the FSC: US$ 1,500
  • Annual CBRD fees: US$ 275

Download our regulatory guide

Distribution of Financial Products

Enabling legislation: s.14 of the Financial Services Act 2007.

Statutory Fees:

  • One-off processing fees to the FSC: US$ 500
  • Annual statutory fees to the FSC: US$ 1,000
  • Annual CBRD fees: US$ 275

Download our regulatory guide

Investment Adviser

Enabling legislation: s.30 of the Financial Services Act 2007.

Statutory Fees:

  • One-off processing fees to the FSC: US$ 500
  • Annual statutory fees to the FSC: US$ 1,500
  • Annual CBRD fees: US$ 275

Permissible activities:

  • unrestricted – authorised to manage, under a mandate, portfolios of securities and give advice on securities transactions other than corporate finance advisory, through printed materials or any other means;
  • restricted – authorised to give advice on securities transactions other than corporate finance advisory, through printed materials or any other means.
  • corporate finance advisory – authorised to provide corporate finance advisory services with respect to securities transactions through printed materials or any other means.

Download our regulatory guide

Investment Dealer

Enabling legislation: s.29 of the Financial Services Act 2007.

Statutory Fees:

  • One-off processing fees to the FSC: US$ 3,000
  • Annual statutory fees to the FSC: US$ 7,500
  • Annual CBRD fees: US$ 275

Permissible activities:

  • full service dealer – authorised to –
    • act as an intermediary in the execution of securities transactions for clients;
    • trade in securities as principal with the intention of reselling these securities to the public;
    • underwrite or distribute securities on behalf of an issuer or a holder of securities;
    • give investment advice which is ancillary to the normal course of his business activities; and
    • manage portfolios of clients;
  • broker – authorised to execute orders for clients, manage portfolios of clients and give advice on securities transactions to clients;
  • discount broker – authorised to execute orders for clients without giving advice;
  • Investment Dealer (Commodity Derivatives Segment);
  • Investment Dealer (Currency Derivatives Segment);
  • Investment Dealer (Government of Mauritius Securities and Bank of Mauritius Securities Segment);
  • Investment Dealer (Equity Segment).

Download our regulatory guide

Investment Banking

Enabling legislation: s.79A of the Financial Services Act 2007.

Statutory Fees:

  • One-off processing fees to the FSC: MUR 100,000 (~US$ 3,000)
  • Annual statutory fees to the FSC: MUR 300,000 (~US$ 9,000)
  • Annual CBRD fees: US$ 275

Permissible Activities:

  • Investment dealer (full service dealer, including underwriting)
  • Investment adviser (unrestricted)
  • Investment adviser (corporate finance advisory)
  • Asset management
  • Distribution of financial services

Download our regulatory guide

 

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