Investment funds are largest asset class in the country
The UAE’s financial wealth will witness a strong expansion in the coming year, growing from $700 billion in 2021 to $1 trillion in 2026, says a new study.
Mustafa Bosca, managing director and partner, BCG, said 2021 has established the UAE as a clear winner in the GCC and among one of the fastest growing markets globally.
“Financial wealth in the UAE grew by 20 per cent in 2021 compared to 11 per cent globally. We had a net inflow of over 2,000 millionaires into the UAE in 2021 and this contributed to 30 per cent of the total financial wealth of GCC,” he said.
BCG expects over 4,000 millionaires’ net inflow into the UAE in 2022.
“The UAE is very well positioned to win in both crypto and climate-related wealth opportunities. We already see major digital assets companies and exchanges set up in the UAE, thanks to the crypto-friendly regulatory environment. In addition, Cop28, which will be held in UAE next year, will further establish the UAE as a destination for sustainable investments and we do think wealth managers and banks should carefully look into these two areas to benefit from this growth,” he said.
According to the new study released by Boston Consulting Group, equities and investment funds are the largest asset class in the UAE and makeup 64 per cent of total personal wealth in 2021, carrying the fastest expected growth estimated at 8.8 per cent.
In 2021, around 41 per cent of the UAE’s wealth derived from ultra-high net worth (HNW) individuals who are worth more than $100 million, whereas individuals with wealth ranging above $1 million held 28 per cent of the UAE’s wealth in 2021.
“We see the Middle East and Africa financial wealth growing year after year, with the UAE in particular, excelling, despite a tremulous global market. In fact, the UAE represented 10.2 per cent of the Middle East and Africa’s financial wealth in 2021, having grown 6.4 per cent every year since 2016 to $0.7 trillion,” said Mustafa Bosca.
It added that currency and deposits represent the second largest class at 29 per cent of total personal wealth in 2021 while bonds make up three per cent in the UAE.
BCG expects life insurance and pensions will become the fourth largest asset class over the next five years.
Bosca said GCC has been growing very fast, reaching $7 trillion of total wealth in 2021. Over the next five years, the Gulf region will add $1 trillion of net financial wealth.
Globally, financial wealth grew by a staggering 10.6 per cent from 2020 to 2021— the fastest rate in over a decade. The double-digit growth created $26 trillion in new wealth and took total financial wealth and the real asset pool close to $530 trillion, said BCG.
It’s estimated that approximately $80 trillion will be created over the next five years.