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By Sunil Kumar Singh
November 24, 2015 | 10:05 | Dubai
Although asset management, and especially the mutual funds industry, in the GCC region has registered phenomenal growth over the years, the market penetration stands at a very low base compared to the aggregate market capitalization. However, Riyadh-based Jadwa Investment, a leading investment management and advisory firm in KSA and the GCC region, believes the reason why the market share looks low is because of the lack of information. In fact, the market penetration of the GCC region’s asset management industry is much larger than it appears.
“Market penetration of industry appears low due to lack of availability of information regarding all segments of the industry,” Zaheeruddin Khalid, Head of Asset Management, Jadwa Investment, told Wealth Monitor. He said, in the region, traditional asset management business falls under two segments: mutual funds and segregated account structures. In addition to the above mentioned segments, assets are also managed by investment arms of family offices which are considered the non-traditional portion of the industry. Most of the data published focuses on the mutual funds, which only constitutes a portion of the overall AUMs within the industry and therefore it appears to be underpenetrated while in reality, the industry manages a much larger amount of wealth. The discretionary portfolio business has witnessed tremendous growth in the past few years and is a portion of the industry which is largely missed while compiling data and therefore promotes the thought that market penetration is low, Khalid added. “In case of Saudi Arabia, our estimates are that AUMs in discretionary portfolios and private funds are about 1.5-1.8x the size of mutual funds industry,” he said. Jadwa has in excess of SAR 20 billion in assets under management which have grown at a healthy CAGR of over 20% over the last 8 years. Public equities in Saudi Arabia and the region form the largest part of AUMs at SR 11.3bn followed by SR 5.6bn in private equity, SR 2.6bn in real estate and SR 0.4bn in fixed income.