Since 2010, the GCC market has doubled its total private wealth from $1.1 trillion to $2.2 trillion for an overall compound annual growth rate (CAGR) of 17.5 percent, making it an even more lucrative market for local and global private bankers, according to a study by management consultancy Strategy&, formerly Booz & Company.
The Strategy& study estimates that at present, there are between 1.5 million and 1.6 million wealthy households in the GCC with total investable assets of around $ 2.2 trillion. Most of the region’s private wealth resides in Saudi Arabia (44 percent), but the UAE has made notable gains with its share of GCC’s private wealth increasing from 24 percent to 30 percent from 2009 to 2013. Together, Saudi Arabia and the UAE control 74 percent of the region’s private wealth, up from 71 percent in 2009.
Daniel Diemers, partner with Strategy& in Dubai, said: “High-net-worth individuals (HNWIs) continue to account for the largest chunk of the region’s wealth at 41 percent, followed by ultra-high-net-worth individuals (UHNWIs) at 34 percent. However, the affluent segment has been growing the fastest over the last five years at 21 percent CAGR, more than doubling in absolute dollar terms from $261 billion in 2009 to $560 billion in 2013. However, during the same timeframe, wealth creation for the region’s HNWIs, at 76 percent, and UHNWIs, at 94 percent, was hardly anemic.”
Jihad K. Khalil, senior associate with Strategy& in Dubai, said: “Powerful macroeconomic and socio-demographic forces are propelling the growth of wealthy households in the GCC. One key driver has been the strong rebound in global equity markets as increasingly aggressive allocations among the region’s wealthiest people helped them recapture value destroyed during the crisis. From 2009 to 2013, global equities saw 50 percent gains.
“The other 60 percent of the $1 trillion in net new wealth was driven by the GCC regional GDP growth, which rose steadily at an average rate of 10 percent per annum as the oil price rose and then was sustained at near-record levels through 2014,” he added.
The study reveals that geopolitical events also intensified the migration of new wealth to the region. Since the start of the Arab Spring and in its aftermath, many regional wealthy households migrated to the more stable countries like the UAE. These households also moved a significant portion of their wealth to either regional or foreign banks based in the GCC countries to which they relocated. The UAE has benefited from this regional phenomenon the most and seen the largest inflows from the wider MENA region.
In addition, sluggish macroeconomic growth in the Western hemisphere, paired with turmoil in the international financial services industry has contributed to some degree of capital being reallocated to its countries of origin, including the GCC.
The study identifies key issues in the regional private banking industry, despite the surge in regional private wealth.
Saudi Arabia, UAE control 74% of the region’s private wealth
