Asset management in the GCC: A market worth watching
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Asset management in the GCC: A market worth watching

At a difficult time for the global asset management industry, the GCC countries are increasingly attractive markets. The region’s oil and gas fuelled wealth and increasing investment sophistication offer huge opportunities. Regional financial centres equipped with world-class regulation and facilities provide the right environments for international firms to establish local operations, while the Shariah-compliant investment market is growing in popularity and diversity. Stuart Pearce, CEO of Qatar Financial Centre Authority, introduces this report.

  A compelling opportunity for asset managers

  On the ground or in the air?

  Saudi strategy: going it alone or finding a partner?

  Three hubs to serve a thriving market

  Distribution holds the key

  Fixed income, equity, local and international assets – a demand for all

  Shariah-compliant market tests perceptions

Stuart Pearce, CEO, Qatar Financial Centre Authority

Stuart Pearce, CEO, Qatar Financial Centre Authority

The current volatility in global financial markets makes this an interesting time to produce a guide to asset management in the Middle East. While no one with exposure to Gulf markets would claim that the region is completely insulated from the current global financial downturn, many would agree that the massive (and rising) investment potential that exists in this region more than compensates for whatever downside there may turn out to be. Offsetting its woes elsewhere, the global asset management industry is becoming increasingly aware of the rapidly increasing wealth of the region – fuelled by oil and gas revenues, the investment strategies of the GCC countries estimated to be in excess of $1.3 trillion, the growing sophistication of sovereigns and other institutional investors, and the emergence of world-standard regulation.

Though still in its infancy, the regional asset management industry is also exhibiting exciting prospects and is estimated by McKinsey to have grown at an average annual rate of 19% between 2001 and 2006. Moreover, projected Middle East onshore assets under management are expected to increase from $57 billion in 2007 to more than $100 billion in 2012, according to Cerulli Associates.

This is where the developmental role of the regional financial centres comes in. Whether based in Qatar, Dubai, Bahrain or elsewhere, they are all introducing world-class regulatory standards and are providing legal and business environments that encourage and support international firms to establish regional operations. Each has different offerings and strengths, but overall their combined attraction is crucial to the growth of regional financial markets, including the asset management segment.

The QFC Authority believes that there is much that can be done to stimulate the growth of asset management in the region. For this reason we commissioned two significant research projects in 2007, to identify incentives for relocation of portfolio management functions to the region, with IFI magazine, and the prospects for the global asset management industry in the Middle East, with the Economist Intelligence Unit (EIU). Both produced very optimistic results, with the EIU reporting 84% of respondents expecting increases in the level of investment in the Middle East among international asset managers.

On a regional basis, a trend worth watching is undoubtedly the increasing popularity, development and diversity of Shariah-compliant investment. This guide looks both at the growing demand for such solutions and the likelihood of where the tipping point might be from sales and administration to on-the-ground manufacturing and distribution.

In Qatar specifically, the bold move announced last year to create a single financial regulatory platform sends a very strong signal to the international finance industry as a whole that the region is adopting a new attitude towards modernization and best practice.

The QFC Authority is pleased to support this important guide which I hope will help to bring added focus for the global asset management industry to these increasingly attractive markets.

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