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Executive summary
Today’s complex economic environment is leading many global asset managers to reconsider their investment strategies. Rising interest rates; tightening liquidity; the fallout from high-profile bank failures; and increased competition for environmental, social, and governance (ESG)–related investments are pressuring the asset management industry to adapt quickly. These developments come at a time when asset managers face increasing challenges in generating alpha (above market average returns), while their traditional business models are struggling with declining margins, digital disruption, and competition for talent.
These global trends are amplified in the Gulf Cooperation Council (GCC) countries. The GCC region has limited participation of institutional investors in the capital markets, an underdeveloped savings culture, and investors with a preference for offshore investing. However, business development in the region also benefits from tailwinds. In recent years, there has been a strong capital inflow into GCC countries from favorable oil prices, along with record growth in initial public offerings (IPOs). The region’s asset management industry is also becoming more competitive with offshore investing thanks to increasing sophistication in product offerings and supportive regulatory initiatives.
These trends position GCC asset managers for significant growth in the coming years. We forecast that the industry will continue to grow above the global average, reaching nearly US$500 billion of onshore assets under management by 2026, up from $400 billion at the end of 2022. To combat the industry challenges and take advantage of the prevailing tailwinds, asset managers must create a winning strategy driven by six key actions. They should:
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1Hone the performance track record
The performance track record is the key source of competitive advantage for retail and institutional markets. Winning asset managers demonstrate consistent overperformance through a number of means. They make significant investments in talent acquisition. They build smart retention and performance management mechanisms. Critically, they organize their internal processes so that their portfolio managers focus on core value-adding activities.
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2Create segment-specific operating models and value propositions
A vital step is to build all components of the operating model specific to each client segment, including institutional, retail, and HNWI clients. The client strategy should pull together the product offerings for each segment. It should include the sales coverage model, marketing plan, legal structures, and back-office capabilities.
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3Build effective sales functions
An effective sales function starts with a results-oriented, properly motivated salesforce engaged in regular account planning processes and pursuing actionable outcomes from client meetings. Asset managers can support their salespeople with a “need identification tool” powered by advanced analytics to facilitate product-oriented discussions with prospects and clients. They also should connect sales and product development teams to enable regular product updates in line with client needs.
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4Revamp the product range
Asset management companies should actively experiment with their product range. They can test client interest in various asset classes, such as real estate investment trusts, private debt, or distressed debt products. They can also try different products, such as IPO funds, international, and sharia (Islamic law)–compliant funds. Such experimentation can help them secure a competitive position when dealing with quickly changing client needs.
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5Exploit digital tools
Asset managers need to explore digital tools along the entire value chain. The leading digital platforms provide portfolio management and optimization tools to help manage investment strategies. These platforms can build tailored investment proposals by modeling portfolios, running stress-test analyses, and identifying key investment trends.
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6Consider non-organic growth opportunities
The fragmented nature of the GCC market offers many opportunities for M&A and partnerships. For example, the Saudi market has approximately 40 midsized, independent asset managers holding from $100 million to $3 billion in assets under management. These firms specialize in one or several asset classes. They could be a natural target for acquisition for companies willing to enter the market, expand their capabilities to leapfrog their peers, or acquire a new customer base. Partnerships have great potential in the region as well. They can take the form of sales management agreements, including “reverse inquiry” deals that enable foreign asset managers to market their products through GCC licensed partners.
Conclusion
GCC asset managers are positioned for significant growth in the coming years—if they adopt the right strategy. With revamped products, digital tools, and non-organic growth opportunities, asset managers can overcome region-specific difficulties, while taking advantage of the tailwinds. They can beat the competition and capture new market share.
Media clip
Opportunities for asset management - Interview with Aurelien Vincent
GCC asset managers are positioned for significant growth in the coming years. With revamped products, digital tools, and non-organic growth opportunities, asset managers can defeat competition and capture new market share. Aurelien Vincent explains how in a recent interview with Dubai One.
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Opportunities for asset management - Interview with Aurelien
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