MANAMA: In the backdrop of a surge in asset management globally reaching $70trillion, the GCC Asset Management Industry reached around US$200 billion as of the end of 2016. This excludes those assets that are managed by the public pensions and sovereign wealth funds. As the industry grows, opportunities will expand for asset management firms to further enhance their market share and increase their distribution channels to individual and corporate investors in the region.
Abdul Rahman Al Baker, Executive Director of Financial Institutions Supervision at the Central Bank of Bahrain, in his keynote address at the 3rd Middle East Assets Management Forum held in Bahrain, told the audience that the industry has grown to become an increasingly substantial segment within the international financial markets and has gained significant interest as efficient alternative model of financial intermediation.
“Generally, it is estimated that the assets management Industry globally reached around US$70 trillion as of the end of 2016. It has also grown significantly, with Assets Under Management (AUM) roughly doubling over the past decade. In the United States, for example, the Assets Under management have risen almost fivefold since 1946, from around US$6.5 trillion in AUM to more than US$33 trillion in 2016. In the United Kingdom this pattern has been replicated, but over a much shorter time period since around 1980. In Asia, the growth of Assets Under Management is significant as they grow three-fold, from US$2.2 trillion in 2007 to US$6.6 in 2016. All of this clearly indicates that global asset management industry is likely to continue its upwards trend, absolutely and relative to the economy, and it is expected to grow to reach US$100 trillion by 2020. Such growth will be mainly due to the fact that economies of South America, Asia, Africa and the Middle East are set to grow faster than in the developed world. Growth in assets will be driven be three key trends: the government-incentivised shift to individual retirement plan, the increase of High Net-worth Individuals from emerging populations and the growth of Sovereign wealth funds (SWFs).
Titled ‘Strengthening the Regional Asset Management Industry 2018’ the conference attracted bankers, financial experts and regulators and was held at the Gulf Hotel.
Overall, he added, the prospects for growth of assets management industry in the GCC are likely to be positive. This positive trend can be attributed to the rapid expansion and increasing sophistication of the GCC financial markets, the enhancement to the existing regulations governing assets management and capital markets, the growth of wealth of High Net-worth Individuals as well as the steady economic growth in the region.
In order to further strengthen the growth of asset management industry, there are several factors that need to be taken into consideration. First, it is critical for asset management institutions to better understand the clients and their needs for financial products and services, as such understanding will help to further expand the horizons of asset management industry. In other words, asset managers should properly address customer expectation, as those failing to adjust will face severe challenges to continued profitability and growth. Furthermore, distribution channels should be more aggressively leveraged to specifically target a whole new class of tech-savvy investors, many of whom command unlimited access to more financial information and advice from their mobile devices than they could obtain from most financial advisors.
Second, treating clients’ fairly will enhance their confidence and ensure that markets are fair, efficient and transparent. This includes having clear and proper disclosures of all terms and conditions of investment products and services, as well as improve the transparency in disclosing financial information and indicators.
As investors have become extremely price sensitive and far more sophisticated about costs, benchmarking, alpha versus beta and risk management, asset management firms will realize they can no longer successfully compete by charging excessive fees for their investment products. Therefore, firms should invest in innovation, tactically re-evaluate investment in their distribution channels, create differentiation and build brand awareness in order to compete successfully and contribute to further strengthen the industry.
Fourth, investment in technology and data management will also need to be increased in order to maximize the distribution opportunities, and to benefit from new opportunities offered by new technologies and social networks in attracting new potential investors and reducing the distribution costs. Currently, the majority of asset managers are not actively involved in social media, other than hosting a website. Technology in the form of social media, mobile phones and other devices will be pivotal in the collection and location of behavioural information that can be harnessed by asset managers to create appropriate products and reach more clients.
Last but not least, it is important to have sufficient number of professionals that are well versed in capital market and asset management services to further develop the industry. This, in turn, will further enhance the products development, improve the services to investors and maintain trust in the market.
“The CBB intends to remain at the forefront of regulating the asset management industry and we look forward to work closely with market players to further develop this key industry.”
Waqf Fund holds its 11th Roundtable Discussion on Pool Management & Profit Distribution
Manama, Bahrain – 9 May 2018 – “Investment account holders contribute a large part of funds available to an Islamic bank; it is therefore appropriate that they are treated fairly and their rights are safeguarded under a robust framework covering pool management and profit distribution”. This was the main theme of the 11th Waqf Fund Roundtable Discussion held at the CBB premises. 24 senior Islamic bankers, Shari’ah scholars, CBB officials, representatives of leading audit firms and AAOIFI participated in the half-day event.
The Roundtable started with a detailed presentation from KPMG’s Mahesh Balasubramanian on the subject. He covered various aspects of the topic including market practices on asset allocation, profit distribution, Mudarib fee ranges, allocation of profit equalization reserve (PER) and investment risk reserve (IRR), etc. He mentioned the regulatory practices from various markets and compared them with the practices of Bahraini retail banks. He recommended consolidating all the disclosures related to investment account holders in one comprehensive report to be published annually as part of the annual report.
The participants raised various questions on key issues and the debated continued for several hours. Given the importance of the topic and the wide range of opinions present, it was concluded that further deliberation was required, perhaps by a committee formed for this purpose.
The Chairman of the Waqf Fund Mr. Khalid Hamad stated, “It is clear from today’s discussion that the issue of investment account holders is a multi-faceted one, with Shari’ah, regulatory and other considerations. It should be handled appropriately to make sure that fair treatment is accorded to all the stakeholders of an Islamic bank.” He thanked the participants for attending the Roundtable and sharing their thoughts on the subject.
