Personal wealth held in investable assets in the UAE is forecast to grow by 7 per cent per year to reach $590 billion by 2022, driven by an uptick in equities and investment funds, following steady growth since 2016, according to a Boston Consulting Group.
Investable assets are cash and bank accounts, equity, bonds, securities and investment accounts, which can be readily converted into cash. Non-investable assets, which are set to see stronger growth of 11 per cent per year in the next five years, include life insurance and pensions, unlisted equity and other equity classes.
Between 2016 and 2017, total UAE personal wealth grew by 8 percent year-on-year, the report said. Currency and deposits accounted for the highest proportion of UAE wealth assets in 2017, at 46 per cent, followed by offshore assets at 30 per cent, life insurance and pensions at 15 per cent and equities and investment funds at 9 per cent.
Most asset allocations experienced growth last year, with equities and investment funds leading the way with 15 per cent year-on-year growth, BCG said. Other drivers of asset class growth included currency and deposits at 11 per cent, life insurance and pensions at 10 per cent, and offshore at 2 per cent.
“While bonds experienced a significant global decline of 10 per cent, bonds in the UAE grew by 1 per cent in the 2016-2017 period,” BCG noted.
Looking to the future, some asset classes will experience “slightly slower but still steady” annual growth, such as equities and investment funds at 12 per cent and currency and deposits at 9 per cent, the report said. Life insurance and pensions is forecast to grow at 11 per cent per year, offshore at 3 percent, and bonds at 2 percent.
Personal wealth in the Middle East rose by 11 per cent to $3.8 trillion in 2017, according to the report, while global personal financial wealth grew by 12 per cent to $201.9tn. Global growth was “mainly driven by the bull market environment in all major economies and the significant strengthening of most major currencies against the dollar”.
While the proportion of total global assets represented by offshore is expected to decline over the next five years to 24.1 per cent in 2022 from 30 per cent in 2017, it will continue to grow at 3 per cent per year to reach $140bn in the UAE.
“As the regulatory climate has tightened over the last decade, there have been significant flows back onshore,” Markus Massi, senior partner and managing director of BCG Middle East’s financial services practice. In the UAE, this is signified by the expected decrease in offshore assets by 6 per cent between 2017 and 2022, he said.