The asset management industry in Gulf Cooperation Council (GCC) countries is set for steady growth over the next decade. This growth is helped by the region’s diversification away from oil and encouragement of foreign investment, Moody’s Investors Service said yesterday.
Moody’s estimates that GCC investment managers had $260bn of assets under management (AuM) as of December 2018. Of the region’s total AuM, Moody’s estimates that around $200bn is invested through separate managed accounts, with collective investment vehicles accounting for the remainder.
“Initiatives to diversify….. should stimulate private investment, attract more international investors, and ultimately spur more growth in the asset management industry,” said Vanessa Robert, VP-Senior Credit Officer at Moody’s.
“Still, asset managers will also face challenges as increased asset inflows test their capacity constraints, and as a more sophisticated client base demands a broader range of products and lower fees”, she saidReal estate is the main alternative asset class for GCC managers, with a primary focus on traditional asset classes, such as stocks and bonds. Moody’s stated that the sector is concentrated in local markets which creates capacity constraints and limits growth.
“GCC asset managers primarily focus on traditional asset classes, with real estate the main alternative class. The sector is concentrated in local markets, creating capacity constraints and limiting growth”, the ratings agency noted.
Moody’s also said that although the regulatory environment is improving, several jurisdictions will need to adopt more rigorous supervision to compete with Western markets. Larger GCC firms that have diversified their offering to include alternative investments and multi-asset products have a competitive advantage.
Meanwhile, a separate report from Cerulli Associates, a global research and consulting firm, in partnership with Insight Discovery Limited, finds that assets under management (AUM) of the institutional investors that are based in the six Gulf Cooperation Council amount to around $3.5 trillion.
This one-time report, The Cerulli Report—Asset Management in the Middle East 2018: Pockets of Addressability, highlights three very different pools of capital available to international asset managers in the GCC countries. The most important institutional investors are the dozen or so sovereign wealth funds (SWFs). AuM of the SWFs that are available to international asset managers is probably around $1.2 trillion. This amount includes holdings of exchange-traded funds and other indexed products.
