Saudi Arabia’s assets under management are set for growth following regulatory reforms, expanding equity and debt capital markets, and increasing numbers of high-net-worth individuals seeking asset-management services, Fitch Ratings said in its latest analysis.
Assets under management rose 13.5 percent year-on-year to over $250 billion during the first half of 2024. This makes Saudi Arabia the largest asset management industry in the GCC region, the 5th largest in the Organization of Islamic Cooperation, and the second-largest public Islamic funds market globally.
Kingdom’s AUM hits 22 percent of GDP in 2023
“We expect Saudi Arabian AUM to cross $300 billion within a couple of years, driven by Vision 2030’s Financial Sector Development Program,” stated Bashar Al Natoor, global head of Islamic finance at Fitch Ratings.
Al Natoor explained that there is a strong demand for Islamic products, with around 95 percent of mutual funds being Sharia-compliant. In addition, he noted that Saudi Arabia’s assets under management reached 22 percent of GDP in 2023, with private funds three times larger than public funds.
“Saudi bank-affiliated managers held 63 percent of industry revenues, but competition from international managers is rising as the government attracts them to Saudi Arabia” he added.
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Equities, real estate dominate private funds’ assets
BlackRock recently partnered with the Public Investment Fund to launch a multi-asset investment-management platform in Riyadh, with investments from the latter.
Private funds’ assets under management in Saudi Arabia doubled since 2020, with the majority in equities (43 percent) and real estate (40.5 percent). Fitch added that about 28 percent percent of public funds were in money markets, followed by equities (25.6 percent), REITs (18.7 percent), and debt (16 percent).
The rising IPOs and uptick in the Tadawul All-Share Index performance are also attracting equity funds. Tadawul is the GCC’s largest stock exchange and the world’s 10th-largest.
The net income of all capital market institutions increased by 29 percent year-on-year to $1.1 billion in H1 of 2024. In 2023, the industry’s returns on equity reached 15 percent with the capital adequacy ratio well above the 8 percent minimum requirement.
Saudi Arabia’s asset management industry remains exposed to oil price and interest-rate volatilities.
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