“Initiatives to diversify, such as Saudi Arabia’s Vision 2030 programme, 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.”
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. 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.
Moody’s estimates that GCC investment managers had US$260bn of assets under management (AUM) as of December 2018. The largest market is Saudi Arabia, accounting for slightly less than half of regional AUM, followed by Kuwait, Bahrain, United Arab Emirates, Qatar and Oman. Of the region’s total AUM, Moody’s estimates that around US$200bn is invested through separate managed accounts, with collective investment vehicles accounting for the remainder.