According to a recent report by Strategy& Middle East, a division of the PwC network, the asset management market in the Gulf Cooperation Council (GCC) is expected to sustain a growth rate surpassing the global average.
By 2026, the asset management market in the GCC region is projected to reach nearly $500 billion in onshore assets. This represents a substantial increase from the $400 billion recorded at the end of 2022.
Estimates from Strategy& Middle East indicate that over 70 percent of private wealth in the region is currently held in offshore accounts.
Historically, high-net-worth individuals (HNWIs) and family offices have shown a preference for offshore accounts. However, there is now a noticeable shift occurring in this trend.
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Favorable regulatory initiatives
Jorge Camarate, partner at Strategy& Middle East and leader of the firm’s Financial Services practice, emphasized the significance of the anticipated growth. He highlighted that this growth reflects the potential of the GCC asset management industry. This potential is particularly notable in the face of global economic challenges.
He noted that despite the region’s historical inclination towards offshore investing, there is a noticeable shift taking place. This change is driven by the rising sophistication of investment products and favorable regulatory initiatives. As a result, onshore investment is becoming increasingly attractive in the GCC region.
Swift adaptation
The projected growth of the GCC asset management industry coincides with the presence of global macroeconomic headwinds.
The industry is being compelled to adapt swiftly due to various factors, including rising interest rates, tighter liquidity, the repercussions of prominent bank failures, and heightened competition for investments related to environmental, social, and governance considerations.
The report emphasizes that the asset management industry in the GCC region has significant potential. It is supported by various tailwinds, allowing it to sustain healthy growth levels. This is particularly noteworthy considering the challenges encountered in global markets.
Furthermore, the findings highlight that the asset management industry in the GCC region possesses substantial potential. It is supported by various favorable factors that contribute to its growth and success.
These tailwinds contribute to the industry’s ability to sustain robust growth levels, even in the face of challenges encountered in global markets.
Trade surplus ratio
The IMF said the trade surplus to gross domestic product ratio amounted to approximately 15 percent for Saudi Arabia and the UAE. For Kuwait and Qatar, the trade surplus ratio surpassed 20 percent.
According to Henley & Partners, the UAE is projected to attract 4,500 new millionaires this year, experiencing significant capital inflows. This influx of high-net-worth individuals represents the second-highest net inflow globally, following Australia.
In contrast to the global slowdown in equity capital markets activity, the Middle East achieved a record-breaking year for IPO (Initial Public Offering) activity in 2022.
Sustained momentum
A recent report by consultancy firm EY said the growth in IPO activity in the Middle East and North Africa (MENA) region maintained its momentum in the second quarter of this year.
During this period, the volume of IPOs on regional stock exchanges experienced a significant surge of 44 percent. The driving forces behind this growth were primarily Saudi Arabia and the UAE, benefitting from robust economic expansion in the region.
In an August report, EY also emphasized that the IPO pipeline for the MENA region remains highly promising and robust. This positive outlook extends to both the second half of this year and the year 2024.
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