DUBAI: Across much of the Middle East, economic growth is strong and financial markets are picking up. But there is surprisingly little cheer in the region’s asset management industry, which faces continued pressure to cut costs and consolidate.
Many fund managers are still struggling with small pools of assets, sluggish inflows of fresh money and high operating costs. The total number of funds being launched has shrunk even as stock markets have risen.
These difficulties are being felt well beyond the confines of the industry; they are a stumbling block in the Gulf’s efforts to create, in cities such as Dubai and Doha, international financial centres which can compete with those in London, Singapore and Hong Kong.
“Going forward, consolidation is going to be a key theme for the sector. There are a lot of discussions happening in that regard,” said Nadi Bargouti, head of asset management at Dubai-based Shuaa Capital.
In most parts of the world, expanding economies, increasing disposable income and climbing asset prices would be enough to galvanise the asset management industry.
Those conditions are all in place in the Gulf, where most of the Middle East’s fund managers are based. More than two years of high oil prices have left government’s sovereign wealth funds and private savers flush with cash. Real estate and equity markets have begun to shake off the global financial crisis; Dubai’s stock market is up 22 percent so far this year, after a 20 percent gain last year.
But the total number of new funds launched in the Middle East and North Africa (Mena) during the first quarter of 2013 dropped to 14, from 24 in the same period last year, according to data from Zawya, a Thomson Reuters company. Zawya estimated 46 funds focusing on investments in the region had been retired in the last 12 months.
Of $1.83 trillion of banking sector assets in the Gulf oil exporters, the Levant and Egypt, only about $41bn have been placed in funds and $177bn are in discretionary mandates awarded to fund managers by single investors. The rest are sitting as deposits in banks, according to Dubai-based Rasmala Investment Bank.
That means about 12 percent of assets in the region are managed; globally, the level is estimated by analysts at above 20 percent.
Reuters
