Private wealth in the United Arab Emirates, which hosts one of the highest concentrations of the world’s super rich, is expected to record the strongest growth in the Gulf Cooperation Council with a predicted compound annual growth rate of 7.4% to $0.8 trillion (Dh2.94 trillion) over the next five years, a new study disclosed last Sunday.
The growth of private wealth in the UAE has outpaced the global surge of 5.3% in 2016, to $166.5 trillion, driven primarily by accelerating economic growth and the strong performance of equity markets in many parts of the world, according to the report by The Boston Consulting Group (BCG). Wealth held by ultra-high-net-worth households in the UAE, which is home to more than 72,000 super rich individuals, is expected to jump by 9.4% in the same period. Despite the general slowdown across the region on the back of lower oil income, the UAE witnessed 8.3% growth in private wealth in 2016 as it continued to lead GCC private wealth growth, the BCG report said.
In the UAE, the growth of private wealth was driven predominately by equities, said the report “Global Wealth 2017: Transforming the Client Experience”.
Last year, the amount of wealth held in equities increased by 9.3%, in comparison to cash and deposit at 8.4% and bonds at 3.8%. The latest growth rate projection of private wealth is lower than The Boston Consulting Group 2016 prediction of a CAGR (Compound Annual Growth Rate) of 14.1%.
According to Shuaa, as a regional gateway, the United Arab Emirates, is estimated to have 35 billionaires and have the second-largest regional population of ultra-high net worth individuals (UHNWI) in the Middle East after Saudi with a population of 810 UHNWI controlling $120 billion. Saudi Arabia is estimated to have a UHNWI population of 1,265 individual controlling about $230 billion.
A report by Cluttons consultancy say Dubai remains to be the most popular destination for high-net worth investors in the GCC, favoured as first choice destination by 27% of respondents to its Middle East Capital Survey, compared with 21% citing Abu Dhabi and 8% for Sharjah.
Based on the BCG’s Global Wealth Report 2017, the overall growth of wealth in the UAE is expected to decrease to 7.4% over the next five years. Cash deposits, at 5.5% CAGR and bonds, at 3.6 per cent CAGR, will be the primary contributors to this over the next five years.
“Digital initiatives in the industry have centred largely on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions,” said Markus Massi, senior partner and managing director of BCG Middle East’s financial services practice. “What is needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end-to-end.”
Over the next five years, wealth in Africa and the Middle East region is set to reach $12 trillion - and the United Arab Emirates, Oman, Qatar and Saudi Arabia’s contribution will account for 21.2%.
An in-depth look at wealth distribution reveals that private wealth help by UHNW households (those with above $100 million) in the UAE grew significantly by 8.8% last year. Steady growth is expected to continue through 2021, with private wealth held by this segment growing at a CAGR of 9.4%.
The upper high-net-worth segment (those between $20 and $100 million) experienced the clearest growth in 2016 at 11.2%. Within the next five years, the estimated growth of this segment will see a slight slowdown to 9.9% CAGR. In the UAE, private wealth held by the HNW segment (those holding between $1 and $20 million) saw a steady growth of 10.5% last year. Private wealth in this segment has a projected CAGR of 8.8% over the next five years. The segment is also expected to experience a slight slowdown in growth in the next five years.
The overall number of millionaire households (that have over $1 million in investible assets) in the UAE increased by 5.9% last year. Looking forward, growth is set to slow to 4.8% within the next four years.
Switzerland remained the largest destination for the Middle East and Africa offshore wealth, accounting for 31% with a projected CAGR of 4.7% over the next five years. This was followed by the UK Channel Islands at 23% with a CAGR of 5% and Dubai at 18% with a CAGR of 4.5%.
Senior partner and managing director of BCG Middle East’s financial services practice, Markus Massi "In the Middle East and Africa, wealth expansion should stem, in relatively equal portions, from existing assets and higher household savings".
"Looking ahead, the share of wealth allocated to each asset class is expected to remain stable, with regional wealth projected to rise at an annual rate of roughly 8 percent through 2021. In the coming years, more local players will enter the wealth management market as traditional revenue pools become more competitive."