State Street Global Advisors, the fourth-largest asset manager in the world, is doubling its resources in the Africa and Middle East region, expanding its hubs in the UAE and Saudi Arabia to achieve the company’s growth ambitions in the broader region, its president Yie-Hsin Hung said.
The company aims to further diversify its client base and build on the $100 billion in funds it manages on behalf of its regional investors amid a sharp rise in the affluent clientele.
State Street expects the “remarkable growth” in the GCC to continue, driven by economic diversification programmes, which has opened new avenues of growth for the Boston-based company that manages more than $4.3 trillion in assets.
“Suffice it to say this region, I think, probably offers one of our fastest growing opportunities globally,” Ms Hung, who is also chief executive of the company, told The National in an interview. “It gives you a sense of just how optimistic [we are] and how important this region is.”
The company this week reopened its office in the Dubai International Financial Centre and will continue to maintain a presence in Abu Dhabi as it looks to increase the headcount in the six-member economic bloc of GCC to accelerate growth.
“What we see here is just incredible wealth accumulation, with financial intermediary market growing, family offices growing, and the talent is abundant here, particularly on the asset management side, which is one reason why we've been drawn back to being here in Dubai,” Ms Hung said.
“It's a combination of the market opportunity, as well as the talent and we're increasing the number of people here, bringing specialist to augment our client coverage.”
Before the end of the year, the company’s team of asset managers operating out of Dubai and Riyadh offices will more than double to 30, while the overall headcount in the region, including its operations in Oman, will grow to 68 from the current 35, said Emmanuel Laurina, State Street’s senior executive officer, who oversees its operations in the Africa and Middle East region.
State Street, which has maintained a presence in the UAE for more than three decades, sees opportunities in exchange traded funds as well as outsourced investments, portfolio management and investment strategy space in the region.
For global asset managers such as State Street and BlackRock there is still a lot of untapped potential of growth in the region, which is the homebase for some of the world’s biggest sovereign wealth funds, including Abu Dhabi Investment Authority and Mubadala Investment Company in the UAE and the Public Investment Fund in Saudi Arabia.
The rapid development of financial intermediary market, growth of family offices, a sharp rise in institutional investors as well as in the number of affluent clients on the back of vast distribution of wealth, make the regional markets – especially Saudi Arabia and the UAE – very attractive for asset managers.
More than 350 asset management firms operate out of the DIFC, and the onshore financial hub has a healthy pipeline of wealth and asset managers that are looking to set up base in the emirate.
Dubai, the region’s fastest-growing commercial, financial and trading hub, is home to the Middle East's highest concentration of resident millionaires at 72,500, according to a report by Henley & Partners, which tracks private wealth and investment migration trends worldwide, and global intelligence provider New World Wealth.
Ranked as the 21st wealthiest city in the world, Dubai recorded a 78 per cent growth in its millionaire population over the past 10 years. It is home to 212 centi-millionaires (people with a net worth of $100 million or more in investable assets) and 15 billionaires.
Being home to 22,700 millionaires, Abu Dhabi was ranked as the world's next big wealth hotspot. The UAE's capital, which recorded a 75 per cent growth rate in its millionaire population over the past decade, is also home to 68 centi-millionaires and five billionaires, according to the report.
Over the past decade, Saudi capital Riyadh recorded a 40 per cent jump in its millionaire population, with 18,200 millionaires, 67 centi-millionaires and eight billionaires calling it home.
The kingdom’s commercial hub Jeddah is home to 7,500 millionaires, 32 centi-millionaires and eight billionaires, the report showed.
Ms Hung, who met Sheikh Maktoum bin Mohammed, Deputy Prime Minister, Minister of Finance and First Deputy Ruler of Dubai, on Tuesday said State Street is open to setting up more offices in the broader region.
“We are keeping an open mind”, but the focus this year remains on existing bases in the UAE, Saudi Arabia and Oman, she said. “As the business continues to grow, we could consider opening up additional offices.”
In terms of the breadth of clients and assets under management, the UAE and Saudi Arabia remain the biggest markets for State Street.
Over the past eight years, there has been a “significant redistribution of wealth”, especially in the regional oil exporting nations. The institutional wealth has also expanded with endowed funds, Mr Laurina said.
Institutional investors that were “predominantly inward looking” and focusing on local markets with internationalised asset allocation have opened a “lot of doors for us to diversify our client base”, he said.
“That's the trend that's continuing and what we're doing now with the growth plan is to add on new segments of clients where we were not necessarily present before, or at least, not strategically.”
In certain locations including in Saudi Arabia, State Street is doubling up efforts as “we think there's a role for us to play not only in terms of managing existing assets here, but also helping to develop the capital markets”, Ms Hung said.
In the US, she expects the higher-for longer interest rate regime to continue but anticipates the US Federal Reserve to start cutting rate this year.
"They are focused on either maintaining rates or cutting but very unlikely to hike rates," she told delegates at the Dubai FinTech Summit in the Dubai.
"In the US, our belief which is somewhat out of consensus, is that the Fed should be positioned to start cutting rates as soon as July and in our view, we think there's room for 75 basis points of cuts and I think a lot of that has to do with really looking underneath the surface.
In terms of global invest themes, State Street remains overweight on equities, cash and gold, despite slowing economic growth.
"I would say longer term, more over the 12- to 24-month period, because of our view on the economy, we would tend more towards quality, both on the equity side as well as on fixed income," Ms Hung said.
"If I focus on the near term, even though the US arguably is trading a little bit higher than the need over time, we still see the strength."
