UAE and Saudi control 74% of $2.2 trillion private wealth in GCC

Feb 17, 2015 12:00 AM

Private wealth in the UAE surged at an annual rate of 25 per cent a year from 2010 to 2014, at a pace far surpassing the regional annual growth rate of 17.5 per cent, a study reveals.

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 per cent], but the UAE has made notable gains with its share of GCC's private wealth increasing from 24 per cent to 30 per cent from 2009 to 2013. Together, Saudi Arabia and the UAE control 74 per cent of the region's private wealth, up from 71 per cent in 2009," said the report.

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, or CAGR, of 17.5 per cent, making it an even more lucrative market for local and global private bankers, according to the study.

Dr Daniel Diemers, Partner with Strategy& in Dubai, said high-net-worth individuals, or HNWIs, continue to account for the largest chunk of the region's wealth at 41 per cent, followed by ultra-high-net-worth individuals, or UHNWIs, at 34 per cent.

"However, the affluent segment has been growing the fastest over the last five years at 21 per cent CAGR, more than doubling in absolute dollar terms from $261 billion in 2009 to $560 billion in 2013. However, during the same time frame, wealth creation for the region's HNWIs, at 76 per cent, and UHNWIs, at 94 per cent, was hardly anemic," said Dr Diemers.

The growth of affluent households from 2010 to 2013 was strong, with total households increasing about 50 per cent, from an estimated range of $850,000 to $880,000 in 2010, to a range of $1.25 million to $1.325 million. The UAE has created the most affluence in the GCC, growing its share of affluent households from 16 per cent to 26 per cent from 2009 to 2013, said the study. Jihad K. Khalil, senior associate with Strategy& in Dubai, pointed out that powerful macroeconomic and socio-demographic forces were 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 helped them recapture value destroyed during the crisis. From 2009 to 2013, global equities saw 50 per cent gains. Of the 1 trillion net increase in wealth during the period, we estimate that the global equity rally's impact on existing wealth accounted for around 40 per cent of that gain," said Khalil.

"The other 60 per cent 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. Governments have used this windfall to spend generously on megaprojects, infrastructure, and job creation - all of which helps to produce more income for wealthy individuals and create a generation of newly affluent citizens and expatriates," he said.

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 Middle East and North Africa 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.

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