Wealth in the Middle East and Africa saw near-double-digit growth at 9.1 percent in 2012, according to according to The Boston Consulting Group’s (BCG) thirteenth annual global wealth management report.
In Maintaining Momentum in a Complex World: Global Wealth 2013, its thirteenth annual study of the global wealth-management industry, BCG addresses the current size of the market, the performance levels of leading institutions, and the state of offshore banking. The report also provides a thorough analysis of the key trends shaping the business landscape.
On a regional level, the report shows that private financial wealth in the Middle East and Africa (MEA) grew to $4.8 trillion in 2012, an increase of 9.1 percent from $4.4 trillion in 2011. Wealth held in equities in the MEA region grew by 18.3 percent in 2012, as compared to increases of 9.2 percent in bonds and 5.2 percent in cash and deposits.
“Qatar ranks first in the world with the highest density of millionaires, with 14.3 percent holding private wealth of at least $1 million. Kuwait ranks third with 11.5 percent, while Bahrain (4.9 percent) and the United Arab Emirates (4.0 percent) ranks seventh and ninth, respectively,” said Markus Massi, Partner and Managing Director at BCG Middle East.
The report asserts that private wealth in MEA will grow to an estimated $6.5 trillion by the end of 2017, with a projected CAGR of 6.2 percent. This increase will largely be driven by new wealth creation linked to strong GDP expansion in oil-rich countries.
“The growth of private wealth in the region has been largely driven by a buoyant GCC equity market and an improvement in the global equity markets overall. Additionally, the recovery of the local real estate markets has helped to free up additional liquidity for financial investments. Wealth held in equities saw strong growth in 2012, although individual markets in the GCC region posted sharply different results. The Dubai Financial Market (DFM) Index enjoyed growth of 19.9% and the Abu Dhabi Exchange (ADX) improved by 9.5%, while other GCC exchanges have seen moderate growth (6% for Tadawul) or as low as 2% in the case of the Kuwait Stock Exchange (KSE),” Massi added.
The Middle East also ranks highly by ultra-high-net-worth (UHNW) households, defined as households with more than $100 million in private wealth. Qatar ranks fourth in the world, with 8 out of 100,000 households falling into this category. Kuwait ranks seventh and UAE comes in fifteenth with 7 and 3 households per 100,000 in this segment, respectively.
Globally, private financial wealth grew by 7.8 percent in 2012 to a total of $135.5 trillion. The rise was stronger than in 2011 and 2010, when global wealth grew by 3.6 percent and 7.3 percent.
The total number of millionaire households reached 13.8 million globally in 2012, or 0.9 percent of all households. The U.S. had the largest number of millionaire households (5.9 million) overall, followed by Japan (1.5 million) and China (1.3 million).
“Globally, we anticipate that the affluent segment will continue to grow their assets. Over the next five years, wealth among households worth $5 million to $100 million will grow by a projected CAGR of 8.0 percent, while the ultra-high-net-worth segment is expected to see a CAGR of 9.2 percent,” Massi concluded.
Global Findings
Offshore Wealth. Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile, rose by 6.1 percent in 2012 to $8.5 trillion. Despite this increase, stronger growth in onshore wealth led to a slight decline—to 6.3 percent from 6.4 percent, compared with 2011—in offshore wealth’s share of global private wealth. While offshore wealth is projected to rise modestly over the next five years, reaching $11.2 trillion by the end of 2017, wealth is increasingly moving onshore due to the intense pressure that tax authorities are exerting on offshore centers.
Wealth Manager Benchmarking.BCG benchmarked the performance of more than 130 institutions from Western Europe, Eastern Europe, Asia-Pacific, North America, Latin America, and the Middle East. Globally, in 2012, wealth managers achieved 13 percent growth in assets under management (AuM) over the previous year. The growth was driven largely by the rebound in many equity markets during the second half of the year, but also by the generation of net new assets.
Key Trends. The report identifies numerous market-landscape trends, client trends, and business-economics trends that will shape the wealth management industry for the rest of the decade. These trends include the following:
· The shift in wealth creation and profit pools toward developing economies
· The decline of traditional value propositions
· The rise in costs and complexity brought on by regulation
Action Steps. The report also identifies critical steps that wealth managers must take if they hope to achieve or maintain a leadership position throughout the rest of the decade. These steps include the following:
· Building a presence in high‐growth markets and with high-net-worth client segments
· Offering segment‐specific value propositions and embracing client centricity
· Industrializing operations and striving for lean front-to-back business processes
A copy of the report can be downloaded at www.bcgperspectives.com.