Private wealth in the GCC has doubled from $1.1 trillion in 2010 to $2.2 trillion in 2014 at an overall compound annual growth rate (CAGR) of 17.5 percent, according to a study.

The study by management consultancy Strategy&, formerly Booz & Company, estimates that there are between 1.5 million and 1.6 million wealthy households in the GCC with total investable assets of around $2.2 trillion.  

Most of the region’s private wealth resides in Saudi Arabia (44 per cent), but the UAE has made notable gains with its share increasing from 24 per cent to 30 per cent during 2009 to 2013. Together, Saudi Arabia and the UAE control 74 per cent of the region’s private wealth, up from 71 per cent in 2009.

Dr Daniel Diemers, partner with Strategy& in Dubai, said: “High-net-worth individuals (HNWIs) continue to account for the largest chunk of the region’s wealth at 41 per cent, followed by ultra-high-net-worth individuals (UHNWIs) at 34 per cent. However, the affluent segment has been growing the fastest over the last five years at 21 per cent CAGR, more than doubling in absolute dollar terms from $261 billion in 2009 to $560 billion in 2013.”

According to the study, the growth of affluent households from 2010 to 2013 was strong, with total households increasing about 50 per cent, from an estimated range of 850,000 to 880,000 in 2010, to a range of 1.25 million to 1.325 million. The UAE has created the most affluence in the GCC, growing its share of affluent households from 16 per cent to 26 per cent from 2009 to 2013.

Jihad K Khalil, senior associate with Strategy& in Dubai, said: “Powerful macroeconomic and socio-demographic forces are propelling the growth of wealthy households in the GCC. One key driver has been the strong rebound in global equity markets as increasingly aggressive allocations among the region’s wealthiest helped them recapture value destroyed during the crisis. From 2009 to 2013, global equities saw 50 percent gains. Of the $1 trillion net increase in wealth during the period, we estimate that the global equity rally’s impact on existing wealth accounted for around 40 per cent of that gain.

“The other 60 per cent of the $1 trillion in net new wealth was driven by the GCC regional GDP growth, which rose steadily at an average rate of 10 per cent per annum as the oil price rose and then was sustained at near-record levels through 2014. Governments have used this windfall to spend generously on megaprojects, infrastructure, and job creation — all of which helps to produce more income for wealthy individuals and create a generation of newly affluent citizens and expatriates,” he added.

The study reveals that geopolitical events also intensified the migration of new wealth to the region. Since the start of the Arab Spring and in its aftermath, many regional wealthy households migrated to the more stable countries like the UAE. These households also moved a significant portion of their wealth to either regional or foreign banks based in the GCC countries to which they relocated. The UAE has benefited from this regional phenomenon the most and seen the largest inflows from the wider Middle East and North Africa region.

In addition, sluggish macroeconomic growth in the Western hemisphere, paired with turmoil in the international financial services industry has contributed to some degree of capital being reallocated to its countries of origin, including the GCC.

This growth in private wealth makes the GCC a lucrative market for local and global private bankers, said the study.

To further grow in attractive wealth segments, private banks need to digitize their offerings and services, develop core capabilities and enhance operating models to be more client-focused, it said. - – TradeArabia News Service