Assets under management (AuM) within fund management companies based in Gulf Cooperation Council countries are predicted to more than double by 2020.
The growth from 2016 levels is set to increase as Sharia-compliant investments continue to rise and more affluent middle class looks to invest more, with total assets managed by fund managers in the GCC expected to rise to US$110.9bn by 2020 from US$45.8bn in 2016, according to a report released by Dubai International Financial Centre (DIFC).
The DIFC Wealth & Asset Management Report 2017: Mapping Opportunities in the MEASA Region has been released in partnership with Thomson Reuters and provides a five-year projection for AuM in key MEASA countries.
At the end of 2016, total AuM by fund managers in MEASA’s key financial centres (India, South Africa, Nigeria, Egypt and the GCC countries) was US$436.5bn. By 2020, the Report projects total AUM to reach US$678.9bn. Looking specifically at the fund managers in the GCC, they expect to more than double their AUM from US$45.8bn in 2016 to US$110.9bn in 2020.
Within the GCC, the asset management market in Saudi Arabia, the Arab world’s largest economy, is expected to grow to more than US$50bn in 2020 from US$22.39bn in 2016, while assets under management in Bahrain are expected to grow to US$22bn from US$18.3bn for the same period.
UAE funds increase
Fund managers in The United Arab Emirates are expected to see a dramatic increase from their current AuM levels of US$1.6bn in 2016 to US$18.9bn in 2020, the report predicted.
Arif Amiri, chief Executive of DIFC Authority, said: “DIFC has identified the wealth and asset management industry as having huge potential for growth over the next five years, which is why we are making a number of enhancements to our platform. From the DFSA’s recently updated Collective Fund Regime to potential legislative changes on the horizon, we believe Dubai and DIFC can play a central role in attracting assets to the region and preparing it for the future of the financial services industry.”
Islamic asset management
Islamic asset management continues to grow, at a moderate compound annual growth rate (CAGR) of 2.44% since 2012 to reach US$58.89bn in AuM at the end of 2016.
Shariah-compliant investments have strong demographic demand but remain “under-utilised”. Representing just 1% of global Islamic funds, Shariah-compliant pension funds could be a key contributor to the Islamic fund management industry in the years ahead, the report stated.
The expansion of the middle class in emerging markets has also created “significant opportunities”, with financial sectors that were previously focused on exporting capital now reinvesting that capital in those requiring finance at home.
The region is particularly attractive for fund managers in the alternative investments sector. In contrast to the perception that investors from the Middle East are heavily concentrated in real estate, these make up just under 20% of assets of HNWIs, among the lowest of any region except Japan and North America.
Alternative investments, by comparison, account for more than 15% of total assets – the highest share globally, the report said.