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Retail asset management industry in nascent state

Investors reluctant to place cash with fund managers

Gulf News

Dubai: Despite growing capital pools and rising wealth of expatriates, the region's retail asset management industry remains very nascent.

Experts at the recent Middle East and North Africa (Mena) Investment Management Forum in Doha said there is indeed a "wall of money" in the region, however, individuals with investible cash are either looking for opportunities elsewhere or reluctant to place their wealth with investment managers.

"It's an emerging industry here. The retail market is very underdeveloped," said George Pickering, managing director for policy, enforcement and risk division of the Qatar Financial Centre Regulatory Authority.

"I think the average Qatari does not necessarily think of buying a fund as opposed to buying real estate or a single share in a company. So, the idea of ETFs (exchange traded funds) or other fund vehicles are not currently in their investment horizon."

The database of Zawya Funds Monitor, which covers 167 regional asset management companies, showed that the 25 largest organisations in the region managed an aggregate of $47.9 billion at the end of 2010. At that time, total assets under management (AUM) of funds domiciled in the Mena region amounted to $68.1 billion, according to the recent Middle East Investment Panorama report by Insight Discovery.

"In terms of the global investment industry, these are not especially large numbers," the report said.

The investment management industry in the region has experienced a turbulent period in the face of the global financial crisis.

"Everyone in the asset management industry regionally, whether you're talking about local players or international players, has seen a big reduction in AUMs. Obviously, no one was immune from that," said Sameer Solh, managing director of Amwal Asset Management, an investment company.

"A lot of our competition has gone away because they have lost capital to manage, which means that they didn't have enough revenues to cover their cost base, so they either had to shut down or be absorbed by larger players."

However, industry experts are optimistic that the commercial opportunity for wealth managers will grow, particularly if governments in the region take steps to promote the development of regional asset management firms.

Cerulli Associates also predict that Middle East's onshore AUM will rise to more than $100 billion in 2012, as banks, private and institutional investors are looking to diversify their portfolios. In its report on asset management, the Qatar Financial Centre Authority also noted that there is a growing pension fund sector, which is becoming a source of investment, estimated at a total of $50 billion for the GCC as a whole and $1.2 billion in Qatar.

Equities abandoned

The region's investors have abandoned equities and shifted their wealth into fixed income assets.

Krishnan Ramachandran, CEO of Barjeel Geojit Securities, said it might take about six months before money will flow back into the equity space.

"People are currently looking at safe assets, which means fixed income. They have withdrawn from the equity market to a great extent because of the volatility that is prevailing across the world," he said on the sidelines of the Mena Investment Management Forum in Doha.