KHALEEJ TIMES, Sunday, Apr 4, 2021 | Shaaban 21, 1442
Saudi asset management industry remains resilient, cautiously optimistic in 2021
Saudi Arabia:
The Saudi asset management industry is well prepared to play a pivotal
role in providing the neces-sary impetus to the overall economic recovery
after posting 14 per cent growth in 2020, experts say.
Ovais Shahab, head of Financial Services at KPMG in Saudi Arabia, said a
resilient asset management industry has withstood the two-fold challenges posed
by the decline in oil prices and the Covid-19 pandemic, whereby investor
redemptions have been limited and asset prices have either been stable or have
rebound.
“As the commercial activity started to resume after limited lockdown; we noted
that the large as-set managers reported AUM growth of 14 per cent since December
31, 2019 with a few public funds and more than 50 private funds launched until
September 30, 2020,” Shahab told Khaleej Times.
Steady growth in
revenue, profits
Latest available data shows that Saudi asset management companies have recorded
a steady growth in revenue, profitability and assets under management (AUM) last
year as they managed to aggregate SR471 billion of AUMs, reflecting a growth of
14 per cent during December 2019 to Septem-ber 2020 despite the pandemic
challenge and slowdown in economy.
In its first edition of the Asset management review recently, KPMG analyzed the
industry’s financial performance through the lens of 12 large asset management
firms regulated by the Capital Market Authority (CMA). It highlighted the
dynamic shift in investment strategies and business plans amid Covid-19 crisis
and how varied investor behaviors have evolved in recent times.
Domestic focus
Shahab said the overarching rationale for the strong performance of the asset
management industry during 2020 was the domestic focus of the industry in
investments and reliance on affluent and institutional investors.
“While the industry had shown the resilience and offered multi assets products
in no time under-pinned by strong capitalisation of fund managers operating in
the industry; Investors’ confidence was sustained when they were able to shift
towards capital protective assets when equities and debts were causing
volatilities,” he said.
Lastly, he said affluent and institutional investors reflected their long-term
view on the market and pliability to liquidity constraints due to wider economic
measures from the government.
Resiliency to
continue
To a question about the industry outlook, he said the Covid-19 crisis made “us
aware of the impact of unexpected events, and though we cannot predict how the
situation will evolve, will continue to improve our handling of the situation
and our resiliency” to such events.
“Based on our discussions with leading industry executives and analysis of
current state of asset management industry; we anticipate increased competition
in the market and investors seeking more value from their fund managers, firms
will need to differentiate themselves through demonstrating cross fertilization
of investment ideas to generate alpha and developing digital enablers to provide
bespoke customer experience.
“Risk appetite of retail investors has been impacted already and they are
expected to pursue diversification agenda at the back of their continued risk
management. However, UHNWI client base for fund managers in Saudi Arabia will
continue to be decisive in maintaining stable AUMs.
“We are also noticing a global uptake in environment, social and governance (ESG)
investments and only a matter of time before ESG becomes a top of the agenda
item for both investors and fund managers in Saudi Arabia,” Shahab said.
KPMG also predicts an uptick in the deployment of necessary capital to start-ups
and entrepreneurs through venture capital or private equity type investments
arising from imminent privatizations and the presence of distressed assets as a
result of the pandemic.
“In line with the global trend, we expect fund managers to offer a diversified
investment suite to potential investors as the risk/reward appetite evolves in
the market and fund managers shift their investment strategies accordingly,”
Khalil Ibrahim Al Sedais, office managing partner at KPMG in Saudi Arabia.
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