Saudi Arabia’s asset management industry is expected to gain from Vision 2030, which is likely to lift the Kingdom’s medium-to-long term growth potential, Moody’s Investors Service said in a recent report.
Asset managers in rest of the Gulf Cooperation Council (GCC) also remain “somewhat” resilient to the impact of the COVID-19 pandemic and drop in oil prices, given their track record of strong performance and an affluent client base.
While assets under management (AUM) dropped in mid-February, net inflows remained positive for large GCC asset managers’ funds, contrasting with net outflows for some Western counterparts.
The resilient inflows are partly reflected by the exceptionally strong performance of GCC stock markets in 2019, as well as the inclusion of Saudi Arabia in the MSCI and FTSE Russell Emerging Market Indexes.
Low oil prices will be a headwind for the region’s asset managers, who are witnessing a decline in their AUM since their customers rely on oil for the bulk of their revenues, Moody’s noted.
Meanwhile, GCC asset managers reported a shift in client assets towards lower risk strategies such as money market investments, fixed income and Sukuks since the start of the pandemic crisis.
Equities account for a high share of GCC asset managers’ portfolios. In Saudi Arabia, 45% of funds are focused on equities, compared with 23% for money market investments and 2% for fixed income in Q2 2019.
“We expect regional investors to maintain a risk-averse stance in the months ahead and possible diversification away from the region to reduce risk,” the report noted.
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