27/08/2011 00:00 AST

Kuwait Financial Centre (Markaz) has released a report on the GCC asset management industry. The report takes an in-depth look at the asset management industry across the GCC in terms of assets under management (AUM), number and types of funds managed, top managers across the various markets, fund costs, benchmarks and performance ranking, and a number of other parameters.

The GCC asset management industry, with roughly 100 asset management companies, manages approximately $29 billion in assets in about 325 funds as of March 31. Geographically, Saudi Arabia country funds account for 62 percent of the total, followed by Kuwait country funds with 19 percent share. In terms of products, money market funds lead the pack with a 50 percent share, closely followed by equities at 47 percent while the remainder is in fixed income and other funds. Of the total, Islamic funds manage $17.6 billion in assets implying a share of 61 percent. In terms of number of funds, GCC/MENA mandated funds top the table with 131 funds, followed by Saudi Arabia country funds with 109 funds and Kuwait country funds with 51 others. Contrary to pattern seen in assets under management, there are more conventional funds (176 funds) than Islamic funds (149 funds).

Kuwait, with $5.4 billion of assets, had the highest AUM to GDP ratio of 4.1 percent, closely followed by Saudi Arabia with AUM to GDP ratio of 4 percent. The ratio for all other countries was less than 0.5 percent implying lack of institutional presence in the investment segment.

Most GCC country funds adopt local stock market indices as their benchmark. Among global index providers, MSCI and S&P are the most active in the region. Majority of Shariah-complaint funds use S&P indices as benchmarks since MSCI discontinued Saudi securities from its indices.

In Kuwait, 7 out of the 20 conventional equity funds use KSE weighted index as their benchmark. Four funds use KIC index (Kuwait Investment Company). Most GCC/MENA equity funds use S&P GCC Index and S&P Pan-Arab Shariah Index as benchmarks for conventional and Islamic funds, respectively.

The ranking of GCC countries in terms of number of funds domiciled, indicate that country of domicile relates to the size of each country's asset management industry with only a few exceptions. There were 140 funds domiciled in Saudi Arabia managing $19.3 billion in assets, followed by Kuwait with 58 funds managing 5.7 billion. Bahrain, true to its reputation as a financial hub, has 39 funds with $1.1 billion in assets. Most of the funds domiciled in Bahrain are mandated to invest in GCC/MENA region.

Given that local investors make up the bulk of participants in GCC/MENA funds, local markets tend to suffice as domiciles for these funds, Saudi Arabia, Kuwait and Bahrain being the most popular choices and accounting for 73 percent of the total.

Despite the fact that the majority of funds across the region are of the "plain vanilla" equity variety, there are new and innovative types of funds which are being introduced to deal with the unique dynamics and opportunities presented by the GCC/MENA markets.


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