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Strong oil prices, capital inflows to drive GCC asset management market to $500b by 2026

IMF estimated in 2022 that GCC countries together held a trade surplus of approximately $350 billion

The asset management market in the GCC is projected to continue growing above the global average to nearly $500 billion in onshore assets by 2026, a leap from $400 billion at the end of 2022, according to a study.

Wealth management experts at Strategy& Middle East, part of the PwC network, believe that despite global market complexities, the GCC asset management industry exhibits robust growth potential, driven by strong capital inflows, favourable oil prices, and substantial trade surpluses.

They said in a report that the region’s asset management industry has several tailwinds that are shifting trends. Currently, more than 70 per cent of the GCC’s private wealth is in offshore accounts.

“This projected growth underscores the potential of the GCC asset management industry amidst global economic challenges. Despite the region’s preference for offshore investing, increasing product sophistication and supportive regulatory initiatives are making onshore investment more appealing,” said Jorge Camarate, partner at Strategy& Middle East, and the leader of the firm’s financial services practice.

The IMF estimated in 2022 that GCC countries together held a trade surplus of approximately $350 billion. Wealthy individuals are also attracted to the region, with the UAE previously projected to attract the most millionaires worldwide in 2022. Additionally, an increased appetite for IPOs saw the Middle East raise a record amount in proceeds, exceeding $20 billion in 2022.

Boston Consulting Group analysts estimated that the Middle Eastern assets under management (AuM) grew by $100 billion from 2021 to 2022, (7.0 per cent CAGR) to reach $1.3 trillion.

The Middle East is home to a large number of ultra-wealthy families, entrepreneurs and royals. Henley & Partners has projected that the UAE will lead the world in attracting private wealth to its economy over the next five years as the country is expected to welcome 4,000 millionaires.

According to an estimate, assets under management in the UAE are expected to show an annual growth rate (CAGR 2023-2027) of 10.59 per cent, resulting in a market volume of $358.10 billion by 2027.

Aurélien Vincent, partner at Strategy& Middle East, said strong capital inflows into GCC countries, supported by favorable oil prices and record growth in initial public offerings, have been critical growth drivers for the asset management industry. “As GCC countries continue to diversify their economies and deepen their capital markets, regional investors and institutions are poised to benefit from an expanding array of investment avenues and opportunities.”

Dmitry Abramov, manager at Strategy& Middle East, said the GCC asset management industry is presented with a unique opportunity for growth. “With the right strategic actions, GCC asset managers can capitalise on the tailwinds to capture new market share, effectively overcoming region-specific challenges.”

He said the asset managers should explore acquisitions of mid-sized independent firms, or form partnerships such as sales management agreements and co-branded products.

“As long as the right strategies are employed, GCC asset managers can overcome region-specific difficulties, beating competition, and capturing new market share in the coming years,” he added.

In response to changing market dynamics, individual investors are increasingly seeking professional advice, driving the GCC asset management industry towards more advanced products. This trend, towards meeting sophisticated investor needs, has been facilitated by crucial regulatory initiatives around the region, Strategy& said in its report.