UAE leads GCC in private wealth growth

Dubai - Growth in UAE outpaces global surge of 5.3% in 2016 to $166.5T

Private wealth in the UAE, which hosts one of the highest densities of the world's super rich, is projected to record the strongest growth in the GCC with a predicted compound annual growth rate of 7.4 per cent to $0.8 trillion (Dh2.94 trillion) over the next five years, a new study disclosed on Sunday.
The private wealth growth in the UAE has outpaced global surge of 5.3 per cent in 2016, to $166.5 trillion, driven primarily by accelerating economic growth and the strong performance of equity markets in many parts of the world, according to the report by The Boston Consulting Group.
Wealth held by ultra-high-net-worth households in the UAE, which is home to more than 72,000 super rich individuals, is expected to jump by 9.4 per cent in the same period. Despite the general slowdown across the region on the back of lower oil income, the UAE witnessed 8.3 per cent growth in private wealth in 2016 as it continued to lead GCC private wealth growth, the BCG report said.
In the UAE, the growth of private wealth was driven primarily by equities, said the report "Global Wealth 2017: Transforming the Client Experience".
In 2016, the amount of wealth held in equities increased by 9.3 per cent, in comparison to cash and deposits at 8.4 per cent and bonds at 3.8 per cent. The latest growth rate projection of private wealth is lower than BCG's 2016 forecast of a CAGR of 14.1 per cent.
According to Shuaa, as a regional gateway, the UAE is estimated to have 35 billionaires and have the second-largest regional population of ultra-high net worth individuals (UHNWI) in the Middle East after Saudi with a population of 810 UHNWI controlling $120 billion. Saudi Arabia is estimated to have a UHNWI population of 1,265 individuals controlling about $230 billion.
A report by consultancy Cluttons says Dubai remains the most popular destination for high net-worth investors in the GCC, favoured as first-choice destination by 27 per cent of respondents to its Middle East Capital Survey, compared with 21 per cent citing Abu Dhabi and eight per cent for Sharjah.
Based on BCG's 2017 Global Wealth Report, overall growth of wealth in the UAE is expected to decrease to 7.4 per cent over the next five years. Cash deposits, at 5.5 per cent CAGR and bonds, at 3.6 per cent CAGR, will be the primary contributors to this over the next five years.
"Digital initiatives in the industry have centered largely on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions," said Markus Massi, senior partner and managing director of BCG Middle East's financial services practice. "What's needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end-to-end."
Over the next five years, wealth in the Middle East and Africa region is set to reach $12 trillion - and the UAE, Oman, Qatar and Saudi Arabia's contribution will account for 21.1 per cent.
An in-depth look at wealth distribution reveals that private wealth held by UHNW households (those with above $100 million) in the UAE grew significantly - by 8.8 per cent - in 2016. Steady growth is expected to continue through 2021, with private wealth held by this specific segment growing at a CAGR of 9.4 per cent.
The upper high-net-worth segment (those with between $20 million and $100 million) experienced the strongest growth in 2016 at 11.2 per cent. In the next five years, the projected growth of this segment will see a slight slowdown to 9.9 per cent CAGR. In the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed a steady growth of 10.5 per cent in 2016. Private wealth in this segment has a projected CAGR of 8.8 per cent over the next five years. The segment is also expected to experience a slight slowdown in growth in the next five years.
The total number of millionaire households (those with over $1 million in net investable assets) in the UAE increased by 5.9 per cent in 2016. Looking ahead, growth is set to slow to 4.8 per cent by 2021.
Switzerland remained the largest destination for the Middle East and Africa's offshore wealth, accounting for 31 per cent with a projected CAGR of 4.7 per cent over the next five years. This was followed by the UK/Channel Islands at 23 per cent with a CAGR of five per cent, and Dubai at 18 per cent with a CAGR of 4.5 percent.
"In the Middle East and Africa, wealth expansion should stem, in relatively equal portions, from existing assets and higher household savings," said Massi.
"Looking ahead, the share of wealth allocated to each asset class is expected to remain stable, with regional wealth projected to rise at an annual rate of roughly 8 percent through 2021. In the coming years, more local players will enter the wealth management market as traditional revenue pools become more competitive."
- issacjohn@khaleejtimes.com