The Middle East has $1.3 trillion in assets under management

Amidst challenging global economic conditions, assets under management in the Middle East witnessed a noteworthy growth of $100 billion from 2021 to 2022, reaching a total of $1.3 trillion, as reported by the Boston Consulting Group (BCG) based in the United States. BCG's recent annual asset management report, titled "Global Asset Management 2023: The Tide Has Turned," revealed a compound annual growth rate of 7 per cent in the region. While outperforming counterparts in Europe and America, the Middle East's asset management sector stands at a pivotal juncture, prompting industry leaders to reevaluate operational strategies to recapture the profit growth observed in preceding years.

Contrary to previous practices, central banks worldwide are no longer focused on engineering sustained market appreciation. Instead, their short-term goals involve slowing down growth to counter inflation, particularly impacting equity markets. The report highlighted that global asset managers can anticipate annual profit growth to be approximately half of the industry's recent average due to existing pressures and market expectations. To restore profit levels to historical norms, the report suggested an overall 20 per cent reduction in costs and a strategic shift in the revenue mix, with at least 30 per cent generated from higher-margin products. The report underscored key priorities for leadership to thrive in the future, emphasizing a focus on profitability, exploring private market opportunities in high-growth alternative investments, and delivering personalized client experiences.

Achieving profitability, according to the report, entails a comprehensive understanding of expenses and drivers in each function, coupled with the implementation of various initiatives to optimize costs rather than merely cutting expenses. In the realm of private markets, the report recommended pursuing high-growth alternative investments to unlock potential opportunities. Given the regional preference for private assets and limited alternative investment instruments, Middle East asset managers were encouraged to explore private market prospects. Moreover, the report highlighted the role of innovative technologies in enhancing personalization efficiency and effectiveness within the sales and marketing processes. The adoption of such technologies could potentially lead to a notable 20 per cent increase in sales conversions compared to traditional approaches.

“In an environment where growth is no longer guaranteed, where fees are being compressed, and where passive investing is increasingly popular, the Middle East’s asset management industry is facing a crucial turning point,” Principal at BCG Farouk El-Hosni explained. “It is now time for leaders to reexamine their organizations’ strategies to take their fair share in the market growth and accelerate profit contributions,” he concluded.