(MENAFN- Khaleej Times) With private wealth in the Middle East and Africa projected to reach $7.2 trillion by 2018, Dubai International Financial Centre is well positioned with its laws and regulations modified specifically to help firms tap this opportunity and bring world-class wealth management competence into the region, Abdul Aziz Al Ghurair, vice-chairman of the Dubai International Financial Centre, or DIFC, said on Tuesday.
Al Ghurair said even with the slide in oil prices, the Middle East, Africa and South Asia region is still a major source of substantial wealth creation.
"The Middle East and North Africa is home to nine of the world's largest sovereign wealth funds with assets of approximately $2 trillion. Other institutional wealth in the region includes GCC pension funds, whose assets are set to grow 8.8 per cent a year to reach $5 trillion by 2020."
Addressing a seminar on "Dubai and Luxembourg: Partnering to Bring you Global Opportunities", Al Ghurair said assets under management in the Middle East and North Africa region had tripled over the past decade while the number of asset managers has quadrupled.
The Middle East and North Africa mutual funds industry was worth nearly $62 billion at the end of 2013, with almost 169 firms managing 815 funds. Looking ahead, assets under management in the broader Middle East and Africa region are expected to rise to $1.5 trillion by 2020, from a total of $ 600 billion in 2012, Al Ghurair said.
"This shows tremendous room for growth in the asset management sector. You also can see this from the very low ratio of assets under management in the Middle East and North Africa. These assets represent barely 2.5 per cent of the region's market capitalisation. This compares with nearly 35 per cent in the United Kingdom and approximately 75 per cent in the United States."
Al Ghurair said the Middle East region also has huge prospects in the sector of Islamic finance. Thomson Reuters has estimated the global Islamic economy has a potential value of $6.7 trillion, while total Islamic financial assets are currently estimated to be $1.35 trillion.
This includes $44 billion in Islamic funds and nearly $1 trillion in the area of commercial banking.
Al Ghurair said Dubai is in the heart of a group of countries that Ernst & Young has identified as being key players in the Islamic finance sector. These countries are Qatar, Indonesia, Saudi Arabia, Malaysia, Turkey and the UAE.
These six countries constitute nearly 80 per cent of global Islamic banking assets and they estimate that those assets will grow nearly 20 per cent a year between 2013 and 2018, said Al Ghurair.
In a recent report, PwC noted that the strongest growth in assets under management will happen in the high-growth, low-penetration economies of South America, Africa, Asia and the Middle East. Three of these four regions are served by the DIFC.
"Luxembourg has established itself as a domicile for funds seeking access to European investors. The DIFC seeks to emulate that success. Through partnerships with centres such as Luxembourg, the DIFC looks to develop and enhance asset management based within the GCC and wider Middle East, Africa and South Asia region."
He said the DIFC has been designed and its laws and regulations modified specifically to help firms address this opportunity and bring world-class wealth management competence into the region.
"This also supports another key Dubai goal to become the capital of the global Islamic economy. Financial services will play a big part in building that infrastructure."
Wealth management firms are increasingly taking advantage of the DIFC platform. As of mid-2014 - the most recent data available - total assets under management in DIFC totalled $17 billion. That's up nearly 50 per cent from a year earlier and up 110 per cent from two years ago.
"This growth is driven by a welcoming environment that includes the right laws and regulatory framework, appropriate fund structures and a deep financial services ecosystem that is unmatched in the region. Also, Nasdaq Dubai is an ideal platform for listing all types of securities, including equities, debt, sukuks, derivatives, Reits and ETFs."
Nearly 150 asset managers operate from the DIFC, including 11 of the world's top 20 money managers, as well as 50 regional start-up fund managers. More than 1,000 funds are marketed from the DIFC. The wealth management sector is also supported by the hundreds of firms operating in the DIFC, including 19 of the world's top 25 banks, seven of the top 10 insurance companies, and nine of the top 10 law firms.
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