Middle East mutual funds sector facing challenges

Published September 7th, 2011 - 02:47 GMT
To pursue growth across borders in the Middle East, asset managers must first develop a clear view about which markets they would like to enter given their current capabilities and resources
To pursue growth across borders in the Middle East, asset managers must first develop a clear view about which markets they would like to enter given their current capabilities and resources

Professionally managed institutional assets and retail mutual funds maintained a good momentum last year in the Middle East and around the world, confirming the rebound from the global financial crisis. However, building on the recovery and achieving a stable growth trajectory will remain a tall challenge, according to a report released by The Boston Consulting Group (BCG).

The report, Building on Success: Global Asset Management 2011, BCG's ninth annual study of the worldwide asset management industry, draws on a detailed benchmarking of leading industry competitors that BCG conducted early this year. The report also reflects a comprehensive market-sizing effort. According to the report, the global value of professionally managed assets rose by eight percent to $56.4 trillion in 2010. The increase - which followed a gain of 13pc in 2009 and a decline of 17pc in 2008 - was driven principally by the continuing recovery of equity markets, with net new inflows remaining marginally positive.

In the Middle East, professionally managed assets amount to roughly $1trn, or a quarter of assets in the region. While BCG expects total assets, both direct and indirect, to grow by around 8pc in the coming years, professionally managed assets are estimated to grow at a slightly stronger rate of around 9pc to 10pc. "While sovereign wealth funds have often maintained a stable share of professionally managed assets, we have found that private households demonstrate a long-term trend to increase their professionally managed assets," said BGC Middle East partner and managing director Dr Sven-Olaf Vathje. "This trend is also evident among insurers, who seem to be increasing their professionally managed assets as part of a broader asset management professionalisation drive".

"To pursue growth across borders in the Middle East, asset managers must first develop a clear view about which markets they would like to enter given their current capabilities and resources," added BCG Middle East fellow partner and managing director Markus Massi. "Just as important, they must accurately assess the level of competition in the new market as local distribution power and connections are key and investor preferences and institutional set-up vary by GCC market.

"Finally, they must decide where they do not want to be in terms of regions, products and client segments. Every asset management company cannot stand for all products - credible specialisation and customer focus is key. "Surprisingly, some asset managers begin their expansion initiatives without fully addressing these basics."


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