Long term prospects for the regional asset management industry is positive, underpinned by strong macroeconomic fundamentals. This is the view that Securities & Investment Company (SICO) will share with investors at the Fund Forum Middle East, which will be held in Bahrain from 19 to 22 October 2009.
Speaking ahead of this prestigious annual event, Anthony Mallis, Chief Executive Officer of SICO, put the Firm’s view into context:
“The impact of the global financial crisis has been widely acknowledged. In an unprecedented chain of events, asset prices have suffered a dramatic decline, leading to deleveraging, asset outflows and liquidation of funds.”
Latest international research statistics show that in 2008, global assets under management (AUM) fell by 17% to US$ 90 trillion. Regionally, some of the best performing mutual funds suffered declines in assets under management of up to 90%, as GCC stock markets lost nearly two-thirds of their value.
SICO also considers that the aftershocks of the global crisis on the economic front cannot be discounted. The region’s nominal GDP is expected to fall by 20% in 2009, while the combined GCC current account surplus could shrink to under US$ 50 billion, a massive decline from over US$ 250 billion the previous year.
SICO has developed market-leading investment insight since its inception in 1995 by offering clients proprietary research based advice. With this deep understanding for GCC regional investment opportunities, SICO has developed an investment business that has consistently delivered strong growth and value for its clients.
At Fund Forum Middle East 2009, SICO will present its views on the new market dynamics facing the regional investment management industry. According to Anthony Mallis: “Many of us will have to shift gears and reassess our business models as it becomes ever more challenging to raise funds.”
SICO predicts a downwards pressure on fees and industry consolidation as managers seek economies of scale. Investors are expected to increase their due diligence efforts in search of qualified managers who can provide stable returns, enhanced risk management and transparent reporting.
Despite the crisis, SICO believes that the outlook for the regional investment industry is far from gloomy. There is strong growth potential, with a large pool funds – estimated at US$ 2.4 trillion – that is largely untapped. A significant proportion of these funds is invested in offshore markets, and could potentially flow back into regional markets.
However, the Firm has identified a number of key challenges need to be resolved before this growth potential can be realised. These include the slow pace of regulatory reform and the lack of a collective investment unit (CIU) framework in the region. Underdeveloped capital markets also limit growth prospects since certain capital markets (especially fixed income) lack depth and breadth; and there is a dearth of skilled professionals in the industry.
“With investors becoming more astute and demanding, it is imperative to bridge these gaps if the regional asset management industry is to grow and mature, and realise its full potential,” Anthony Mallis concluded.
