Wealth funds drive Mideast AuM sector to $1.2trillion

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In the GCC, the $260 billion AuM industry is set to grow at a steady pace over the next decade.

Driven by sovereign wealth funds, assets under management (AuM) in the Middle East have witnessed double-digit growth despite the turbulent times, increasing by 11 per cent to $ 1.2 trillion in 2020 from $1.1 trillion in 2019, according to Boston Consulting Group.

Apart from the region’s sovereign wealth funds, retail mutual funds’ assets were fundamental to this surge in AuM, with further growth opportunities likely as markets emerge from economic difficulties, BCG said in a report.

Despite the unprecedented turbulence of late, the asset management industry in the Middle East has emerged in a favourable position, said the report, titled “Global asset management 2021: The $100 trillion machine”.

“Much like every sector, the resilience of the asset management industry was tested in 2020, with initial outbreak disruption and subsequent economic tailwinds presenting a period of sizeable uncertainty for the industry and its incumbents,” said Harold Haddad, managing director and Partner, Boston Consulting Group.

In the GCC, the $260 billion AuM industry is set to grow at a steady pace over the next decade, as regional governments overhaul their hydrocarbon-dependent economies and ease regulations to attract foreign investors, Moody’s Investors Service said in its latest report.

Saudi Arabia, the biggest Arab economy and Opec’s top oil exporter, accounted for slightly less than half of the regional assets, followed by Kuwait, Bahrain, the UAE, Qatar and Oman. Of the total assets managed in the region, around $200 billion is invested through managed accounts and the rest through collective investment vehicles that pool investors’ accounts, according to Moody’s estimates.

At the global level, net inflows for the asset management industry reached $ 2.8 trillion in 2020, or 3.1 per cent of the total AuM at the beginning of the year – compared to a historical average between 1-2 per cent over the previous decade, the 19th annual BCG study of the global asset management industry said as it explored the extent of growth that other markets have accumulated during challenging conditions, showcasing key drivers while providing comprehensive explanations.

Retail investors proved to be the main driver behind AuM growth. Global retail AuM portfolios grew globally by 11 per cent in 2020, representing 41 per cent of global assets at $42 trillion. Institutional investments also grew at a similar pace to reach $61 trillion, or 59 per cent of the global market, said the report.

“The Middle East has prevailed in the face of adversity, and it is now apparent that the region has entered 2021 in a position of strength following healthy returns,” Haddad said while commenting on BCG’s report.

AuM growth in the region is primarily attributed to an increase in sovereign wealth funds (SWF) assets, mostly due to strong capital market performances. Many SWFs had high equity exposure in developing and emerging markets, faring well as the financial landscape regained a degree of pre-pandemic stability. Furthermore, another main driver of AuM growth was retail investors. In the Middle East, retail mutual funds had 12 per cent growth during 2020, with strong global market performance instigating this outcome.

“The asset management industry is coming out of the recent crisis with notable changes. Although the operating environment continues to change, the growth recorded from 2019-2020 – in such a precarious climate – implies further development in due course as countries continue their reemergence, with many opportunities sure to present themselves as new trends accelerate,” said Mustafa Bosca, managing director and partner, BCG. — issacjohn@khaleejtimes.com

Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE’s mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.

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