It’s been another bad year for the Mena fund markets and, with the Arab Spring in full flow, investment remains low. Before the revolutions, markets looked to be in a state of recovery while efforts were made to ensure the long term viability of the Mena fund market. The boutique market research company Insight Discovery has released a report showing the findings of its Middle East Investment Panorama (MEIP) survey, a sequel to last year’s Gulf Professional Adviser Survey (GPAS) released last year, which suggests that any good news surrounding the market has been blighted by a dampening of investors’ confidence.
The Mena market would have hoped for a continuation of the positive trends shown in the GPAS results, however the setbacks of 2011 have slowed the rate of progress. The GPAS stated in 2010 that 84.2% of professional advisers actually had dealings with international asset management companies and/or life companies. More than two-thirds (68.7%) invested in or recommended investment funds while more than one third (36.0%) recommended or had dealt in products offered by international life companies.
Advisers, whether they work with clients or as executives for the companies that employ them, typically need the services of international asset management companies or international life companies. The MEIP survey shows that by mid-2011, this was true of 84% of advisers in relation to international asset management companies and about half in relation to international life companies, which is almost identical to the figure recorded in the GPAS. However, fewer than 40% use the services of regional asset managers. Nevertheless, there is significant need for regional asset managers by advisers who are working with clients who are nationals of the Mena region.
According to the MEIP survey, just over one-fifth of the advisers told Insight Discovery that their companies hold 30% or more of client assets in the Mena region. This percentage is – unsurprisingly – similar to the number of advisers who actually come from the Mena region. No fewer than 36.4% of advisers hold less than 5% of their client assets in the region. For another 26.3%, the proportion of client assets in the region ranges from 5% to 15%. The percentage of advisers who hold a ‘significant minority’ of client assets in the region (i.e. between 15% and 30%) is only 15.5%. No less than 61.4% of the advisers spoken to said that they expect the percentage of client assets which are allocated to the region to stay the same over the coming year or so, or to fall. By deduction, this means that 38.6% of advisers are looking to increase the percentage of client assets that are allocated to the Mena region.
Nigel Sillitoe, CEO of Insight Discovery, told Mena FM that the difficulty in trying to penetrate the opacity of the Mena asset management industry makes it hard to quantify the market opportunity. “The GCC countries are home to four of the world’s 12 largest sovereign wealth funds (SWFs) and, according to some estimates, SWF assets of over $1.66trn,” he said. “Gross Ucits fund sales in the Mena countries last year were around $6bn. This understates the size of the regional funds market, though, because a substantial amount of business is being booked through private banks in Switzerland and Singapore.
“What is abundantly clear is that several of the better known international life companies are generating substantial inflows to their fund ranges – often through close collaboration with private banks and the international life companies. With assets under management of around $50bn, the regional asset managers are small in global terms, but evidently have the potential to grow very strongly.”
