Dubai: Positive economic outlook, family businesses and the population demographics will drive assets under management (AuM) growth in the Middle East, which is expected to rise to $1.5 trillion by 2020, according to a research report released yesterday by PwC.

The report, ‘Asset Management 2020: A brave new world’ states that diversifying economies, great investment opportunities and favourable regulation complemented by highlight events, Dubai Expo 2020 and Qatar Fifa World Cup 2022, will attract the capital inflow into the region.

Younger generation of family businesses, who are considered very powerful in the economic landscape of the Middle East, will play an important role as well as people who run SMEs (small and medium enterprises) and with an overall population that is young and most people in their mid-career and most entering employment, the potential of pension fund growth is strong.

The local population of the GCC countries who work for government entities are offered great state-administered pension funds hence the 2011-2012 year-on-year growth was nine per cent to 16 per cent.

Pension fund assets

Therefore, PwC predicts pension fund assets will grow by 8.8 per cent a year to reach $5.0 trillion by 2020 from a 2012 total of $2.4 trillion.

The expected growth of AuM will be at a CAGR (compound annual growth rate) of 12%. The 2012 AuM stands at $0.6 trillion.

Penetration of the asset management industry in Mena is still low compared to global markets; mutual funds under management in 2012 was around 2.5 per cent of market capitalisation hence there is huge potential available to local and international players.

“Strong branding and investor trust in 2020 will only be achieved by those firms that avoid making mistakes that attract the ire of investors, regulators and policymakers,” said Graham Hayward, Middle East Financial Services Leader, at PwC. “Asset managers must deliver the clear message that they deliver a positive social impact to investors and policymakers. The efforts required to satisfy investors and policymakers cannot be left to others.”

Research from PwC predicts that global assets under management (AuM) will rise to around $101.7 trillion by 2020, from a 2012 total of $63.9 trillion. This represents a compound annual growth rate (CAGR) of nearly six per cent.

The report also finds that assets under management in the SAAAME (South America, Asia, Africa, Middle East) economies are set to grow faster than in the developed world in the years leading up to 2020, creating new pools of assets that can potentially be tapped by the asset management (AM) industry. However, the majority of assets will still be concentrated in the US and Europe.