Traditional asset management, particularly the mutual fund industry, will grow at a compound annual growth rate (CAGR) of nearly 9.6% in 12 markets across Africa by 2020, according to a research from PwC.

The report entitled Africa Asset Management 2020, predicts that traditional AUM in 12 African markets will rise to around $1,098bn by 2020, from a total of $293bn in 2008.

Ilse French, PwC Africa Asset Management Leader, said as wealth continues to increase, more domestic investors emerge, while improvements in national regulatory frameworks are enticing foreign investment and distribution.

She said that growth rates in mutual funds has been rapid with Nigeria showing an “incredible CAGR of 33.8% in just four years between 2011 and 2014”.

The report examines the asset management industry in the following countries: Ghana, Nigeria, Angola, Botswana, Namibia, South Africa, Mauritius, Kenya, Egypt, Tunisia, Algeria and Morocco.

Those countries vary from those with extensive legislative frameworks, such as South Africa, to those in much earlier stages in the development of their regulatory frameworks, such as Angola.

“Although the fund industry in Africa is, in most countries, still developing and has much to prove, global and local asset managers are likely to become more active as the industry continues to flourish,” French said.

Regulatory reform is likely to boost economic growth and stimulate investor appetite.

“As Africa has entered the 21st century, economic growth has surpassed expectations and stimulated investor interest across a broad range of asset classes,” she said.

Changes to regulations to pension funds in particular could have an effect on the asset management industry as public pensions are usually the largest institutional investors in many African countries.

These changes include allowing pension funds to invest in a wide range of assets or the establishment of a three tier pension system.

In addition, sovereign wealth funds (SWFs) can fill existing funding gaps until the legal frameworks of African countries develop sufficiently to make them appealing to other investors.

“As large institutional investors, SWFs could provide a considerable boost to the asset management industry in Africa, particularly because they are long-term investors who seek stable returns,” said French.

The fact that most of the funds use a proportion of their assets to make impact investments domestically or regionally suggests that they will become big players in local markets.

“As asset managers look for new investment channels and competition becomes increasingly intense, understanding the characteristics of the local markets will be crucial to grasp the potential of this final frontier,” added French.