Can GCC offer bright spots for asset management industry?

GCCBanknotesAn uneven global economic recovery vulnerable to increasing Covid-19 cases is said to be a primary factor behind the asset management industry’s negative outlook for the coming year, according to rating agency Moody’s. However, for the Gulf Cooperation Council’s (GCC) asset management sector, the growing demand for Islamic banking and the opening up of markets to foreign capital all offer growth opportunities. The annual Moody’s Investor Service outlook, published on Tuesday, highlighted that the sector finds itself in a challenging operating environment due to increased market volatility and a shift to more conservative strategies that dampen revenue. Lower risk appetite is stunting organic growth, according to the credit rating firm, as demographic trends in advanced economies are driving asset drawdowns. According to Moody’s assistant vice president, Rokhaya Cisse, the asset management industry is ripe for consolidation as it is fragmented with the top 10 firms taking 35% of global market share and “oversupply” of mutual funds. Traditional active management remains out of favour with investors, and fee pressures have been accelerating in commodity-type products. “Especially in the US, larger banks and insurance companies will be formidable bidders for asset managers that can increase their own competitive edge,” Cisse added. However, the report also highlighted some potential bright spots within the GCC asset management market. These included the opening up of GCC markets to foreign capital, as seen by the withdrawal of caps on foreign ownership limits. In addition, the inclusion of Saudi Arabia, Kuwait and the UAE on major investment indices should see a large inflow of foreign investment capital as passive players broaden their coverage universe. The report also notes that the growing demand for sharia-compliant investments in well-established Islamic banking sectors, such as the UAE, is another area of potential growth. Other areas expected to attract asset flows over the next few years include alternatives, ESG, and outcome-oriented products and services, such as managed retirement accounts. It stated that the overall share of ESG assets under management is small at present but that the potential for growth is “significant”. ©2019 funds global mena

Sponsored Profiles

There’s no doubt that Africa has been seen increasingly as an attractive prospect for inbound investment in recent years, with investors seeing real potential in the continent, particularly in the private equity, infrastructure and real estate asset classes, as it experiences strong economic growth.

Plausible explanations exist for why low-volatility stocks perform better than their high-volatility counterparts.

Aberdeen Asset Management has set up its first Middle East office in the newly established Abu Dhabi Global Market. Andrew Paul, senior executive officer, explains why.

A recent sovereign bond issue from Saudi Arabia underlines the appeal of emerging market investing. What must investors consider when allocating to this asset class? Firas Mallah of BMO Global Asset Management shares his views.

Executive Interviews

INTERVIEW: ‘Financing is the blood of Iran’s economy’

Amid a fresh wave of American sanctions, Romil Patel spoke to Meysam Hamedi, director of financial markets and instruments at Iran’s Securities & Exchange Organization (SEO).

INTERVIEW: Totally mega

In 2016, global consulting firm PWC forecast the emergence of five global ‘megatrends’ in the next two decades. Stephen Anderson, its Middle East clients and markets leader, talks about their...

INTERVIEW: Protecting the investment

Rasmala’s trade finance fund recently passed $100 million in assets. Doug Bitcon, head of credit strategies, explains why he has to be hands-on.

EXECUTIVE INTERVIEW: A natural interest in the topic

Since 2016, Guillermo Ortiz has been a chairman of Latin America’s BTG Pactual. The former central banker of Mexico talks to Nick Fitzpatrick.


Middle East Investor Roundtable 2020: Dimensions of diversification

Investors in the Middle East consider the tools that will be needed to navigate the Covid-19 crisis, the continued appetite for dividend and why it’s all about tech. Chaired by Romil Patel.

South Africa asset management roundtable: Global rebound on ice

Experts discuss the investment implications of the coronavirus pandemic, a delayed rebound in global growth and dealing with South Africa’s energy issues head on. Chaired by Romil Patel in Cape Town.

South African roundtable: Taking the bull by the horns

Our panel discusses Chinese investment in Africa, financial institutions’ contribution to economic sustainability and regulatory concerns. Chaired by Romil Patel in Cape Town.

ROUNDTABLE: Hooked to the global caravan

With the MENA region at a tipping point, our panellists talk about economic diversification, the impact of regulation and the delayed Saudi Aramco listing. Chaired by Romil Patel in Dubai.