UAE free zones join the chase for Asian wealth

The DIFC and ADGM can reap dividends by focusing on Asia, where 75% of all family businesses worth more than $1bn is located. In fact emerging markets are on track to eclipse developed ones within a decade

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There is good news, and a note of caution, from the lucrative business of wealth and asset management and private banking, which is becoming increasingly important for the UAE’s two fin­ancial free zones.

It is an area of focus for the Dubai International Fin­ancial Centre and the Abu Dhabi Global Market. Both hubs regard the sector as an important revenue stream for the long term.

DIFC has made it a crucial part of a strategy by which it aims to triple in size by 2024; ADGM identified it as a main – although not exclusive – business line when it launched just over a year ago. What has attracted strategists in both centres is that handling the financial affairs of wealthy individuals, families and institutions makes a great deal of sense in a world where an increase in the number of wealthy people appears unstop­pable.

Even the great financial crisis of 2009 was only a blip in the wealth-creation process.

Some argue that the quantitative easing policies since then have increased the number of wealthy individuals, and increased the amount of financial inequality in the world.

We can leave this argument to the political economists; for the financial strategists, it is sufficient that there is simply more business around.

The trend has coincided with the new enrichment of great parts of the world previously regarded as “emerging”. It seems crazy now to label China and India as such when they lead Asia’s growing band of billionaires.

Asia is home to 75 per cent of all family businesses worth more than US$1 billion, and the amount of wealth in the “emerging” world is destined to overtake the “developed” world some time around the middle of the next decade.

The other two pieces of good news for DIFC and ADGM are that the “tilt to the East” has left them much better placed in terms of geography and time zones to take advantage of this phenomenon; and that regulators in the West seem determined, in the wake of the crisis, to hamstring their wealth and asset management and private banking industries.

So the field is open for the Arabian Gulf centres to challenge in this lucrative field, and we have seen increasing business already. Just this week, Pictet, a venerable Swiss private bank and asset manager, opened up in DIFC. Later this month, Aberdeen Asset Management, a world leader in the sector, opens up in the ADGM.

But now for the cautionary sting in the tail – the rest of the world will not just let the Gulf walk away with the rich pickings in this business.

While some of the traditional names in the big banking business – Goldman Sachs, ABN Amro – have scaled back in Asia, others, particularly the Swiss, such as Credit Suisse, UBS and Julius Baer, have renewed their commitment to it big time.

It is good that, in some cases, they are doing it through the Gulf centres, as well as through the traditional hubs in Singapore and Hong Kong, but the competition can only get hotter as the battle to manage Asia’s wealth intensifies.

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