The asset management industry in Gulf Cooperation Council (GCC) countries “is set for steady growth over the next decade,” according to ratings agency Moody’s Investors Service.
The firm noted that this growth is helped by the region’s diversification efforts away from oil and encouragement of foreign investment.
“Initiatives to diversify, such as Saudi Arabia's Vision 2030 program, 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 added.
Real 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.
The ratings agency also noted that improvements have been made in the regulatory market, but that several jurisdictions need to improve supervision to compete with Western markets.
Larger GCC firms that have already began offering alternative investments and multi-asset products have a competitive advantage in this regard, Moody’s added.
As of December, 2018, GCC investment managers had some $260 billion in assets under management (AUM), according to Moody’s estimates.
Saudi Arabia leads as the largest market, accounting for just under half of regional AUM, followed by Kuwait, Bahrain, the UAE, Qatar and Oman.
Estimates from Moody’s suggest that around $200 billion is invested through separate managed accounts and collective investment vehicles account for the remainder.