Deciding whether to change positions when big data flags up interesting patterns is the next challenge for fund groups, according to Michael Hintze, chief executive of multibillion-dollar asset management company CQS. Image Credit: Getty

Dubai: The size of the Middle East’s asset management industry grew 11 per cent from 1.1 trillion of Assets Under Management (AuM) in 2019 to $1,2 trillion in 2020 according to a Boston Consulting Group (BCG) report ‘Global Asset Management 2021: The $100 Trillion Machine,’

“Much like every sector, the resilience of the asset management industry was tested in 2020, with initial outbreak disruption and subsequent economic tailwinds presenting a period of sizeable uncertainty for the industry and its incumbents,” said Harold Haddad, Managing Director and Partner, BCG.

“However, the Middle East has prevailed in the face of adversity, and it is now apparent that the region has entered 2021 in a position of strength following healthy returns.”

SWF impact

The report finds that the AuM growth in the region is primarily attributed to an increase in Sovereign Wealth Funds (SWF) assets, mostly due to strong capital market performances.

Many SWFs had high equity exposure in developing and emerging markets, faring well as the financial landscape regained a degree of pre-pandemic stability. Furthermore, another main driver of AuM growth was retail investors.

In the Middle East, retail mutual funds had 12 per cent growth during 2020, with strong global market performance instigating this outcome.

The 19th annual BCG study of the global asset management industry explores the extent of growth that other markets have accumulated during challenging conditions, showcasing key drivers while providing comprehensive explanations.

Rise of retail portfolio

At the global level, net inflows for the asset management industry reached $2.8 trillion in 2020, or 3.1 per cent of the total AuM at the beginning of the year – compared to a historical average between 1-2 per cent over the previous decade. Again, retail investors proved to be the main driver behind AuM growth. Global retail AuM portfolios grew globally by 11 per cent in 2020, representing 41 per cent of global assets at $42 trillion. Institutional investments also grew at a similar pace to reach $61 trillion, or 59 per cent of the global market.

“The asset management industry is coming out of the recent crisis with notable changes. Although the operating environment continues to change, the growth recorded from 2019-2020 – in such a precarious climate – implies further development in due course as countries continue their reemergence, with many opportunities sure to present themselves as new trends accelerate,” said Mustafa Bosca, Managing Director and Partner, BCG.

BCG’s 2021 Global Asset Management report considers how new realities – for example, in markets and technology – will shape future industry leaders and why specific areas, such as private markets, ESG investing, and advanced data and analytics, are likely to play key roles.

Given the opportunities for asset management industry growth and transformation in the years ahead, the study also explores private markets’ outlook and projections. BCG highlights the potential for sizeable progress within private markets, especially for firms that can successfully enter the retail market, systematically use data and analytics to enhance decision making, and integrate meaningful ESG metrics.