Western banks expect to develop asset management operations in MENA
Growing numbers of high net worth individuals, gradual economic reform and the deepening of capital markets are encouraging many western financial services firms to set up or expand asset management operations in the Middle East. According to a recent survey by the Economist Intelligence Unit, more than 80% of respondents say that they expect to increase their investment in the region over the next three years. A number of factors, however, continue to deter potential investors, including concerns about the regulatory environment, a lack of transparency and political instability in the region.
The survey forms the basis of Asset management in the Middle East: The prospects for global financial institutions, a newly released Economist Intelligence Unit report sponsored by the Qatar Financial Centre (QFC) Authority. The report looks at the business environment for asset management in the Middle East, examines the region's developing investor culture and explores some of the products and services that are likely to attract attention as the sector develops.
"There is a strong appetite among global financial institutions to invest in the asset management sector in the Middle East," says Rob Mitchell, editor of the report. "High levels of wealth are fuelling strong demand for private banking and wealth management services, while greater maturity among investors and a more robust financial infrastructure are encouraging the development of the retail investment sector. But despite these opportunities, a number of problems persist that are deterring further investment, including a lack of transparency, concerns about the regulatory environment and difficulties recruiting skilled finance professionals in the region." The conclusions of the report are based on a survey of 180 senior executives from financial services firms conducted by the Economist Intelligence Unit and a series of in-depth interviews with representatives from companies that are already investing in the region.
Key findings of the report include: Private banking is seen as the strongest investment opportunity. Financial institutions that offer private banking and wealth management services see the Middle East as an increasingly important market, and many are recruiting or relocating client relationship managers to serve the region.
The growing ranks of high net worth individuals, coupled with developments in the capital markets in the region, are increasing demand for more sophisticated products, including derivatives, hedge funds and exchange traded funds.
Other important investment opportunities cited by respondents include private equity and retail investment.
Islamic finance is becoming an important component of the asset management offering. Both survey respondents and interviewees questioned for the report are confident that the growth of the Islamic finance sector will continue. To date, it has not been particularly strong in many areas of asset and fund management, but this is likely to change. Almost 60% of respondents say that they expect a substantial increase in demand for Islamic finance products over the next three years, and a growing proportion of respondents say that they expect at least some of their products to be Shariah-compliant.
Strategic alliances seen as the most favoured entry or expansion strategy.
Entry or expansion strategies into the Middle East depend on individual market conditions and the regulatory environment of the specific country but, in general, respondents favour strategic alliances and joint ventures. With the provision of banking licences becoming more commonplace, however, it is likely that more and more foreign banks will take the branch licence or representative office approach.
A number of issues continue to deter investment in the region. Despite progress in areas such as the regulatory and business environment, respondents point to a number of deterrents to further investment in the region. Concerns about the geopolitical environment remain high on the agenda for many in the sector, with 71% citing this as significant. A lack of transparency and poor standards of the regulatory regime are also raised as an issue, with 65% citing these as deterrents to investment. Source
The survey forms the basis of Asset management in the Middle East: The prospects for global financial institutions, a newly released Economist Intelligence Unit report sponsored by the Qatar Financial Centre (QFC) Authority. The report looks at the business environment for asset management in the Middle East, examines the region's developing investor culture and explores some of the products and services that are likely to attract attention as the sector develops.
"There is a strong appetite among global financial institutions to invest in the asset management sector in the Middle East," says Rob Mitchell, editor of the report. "High levels of wealth are fuelling strong demand for private banking and wealth management services, while greater maturity among investors and a more robust financial infrastructure are encouraging the development of the retail investment sector. But despite these opportunities, a number of problems persist that are deterring further investment, including a lack of transparency, concerns about the regulatory environment and difficulties recruiting skilled finance professionals in the region." The conclusions of the report are based on a survey of 180 senior executives from financial services firms conducted by the Economist Intelligence Unit and a series of in-depth interviews with representatives from companies that are already investing in the region.
Key findings of the report include: Private banking is seen as the strongest investment opportunity. Financial institutions that offer private banking and wealth management services see the Middle East as an increasingly important market, and many are recruiting or relocating client relationship managers to serve the region.
The growing ranks of high net worth individuals, coupled with developments in the capital markets in the region, are increasing demand for more sophisticated products, including derivatives, hedge funds and exchange traded funds.
Other important investment opportunities cited by respondents include private equity and retail investment.
Islamic finance is becoming an important component of the asset management offering. Both survey respondents and interviewees questioned for the report are confident that the growth of the Islamic finance sector will continue. To date, it has not been particularly strong in many areas of asset and fund management, but this is likely to change. Almost 60% of respondents say that they expect a substantial increase in demand for Islamic finance products over the next three years, and a growing proportion of respondents say that they expect at least some of their products to be Shariah-compliant.
Strategic alliances seen as the most favoured entry or expansion strategy.
Entry or expansion strategies into the Middle East depend on individual market conditions and the regulatory environment of the specific country but, in general, respondents favour strategic alliances and joint ventures. With the provision of banking licences becoming more commonplace, however, it is likely that more and more foreign banks will take the branch licence or representative office approach.
A number of issues continue to deter investment in the region. Despite progress in areas such as the regulatory and business environment, respondents point to a number of deterrents to further investment in the region. Concerns about the geopolitical environment remain high on the agenda for many in the sector, with 71% citing this as significant. A lack of transparency and poor standards of the regulatory regime are also raised as an issue, with 65% citing these as deterrents to investment. Source
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