UAE, Saudi SWFs, mutual funds power GCC AuM to $2.2 trillion

20/08/2025 03:16 AST

The GCC's asset management industry has entered a new phase of expansion, reaching $2.2 trillion in assets under management (AuM) in 2024 - a 9 per cent increase from the previous year - according to a new report by Boston Consulting Group (BCG).

The strong momentum is being powered by sovereign wealth funds (SWFs), retail mutual fund growth in Saudi Arabia and the UAE, and a rapid embrace of digital transformation.

The region's trajectory is unfolding against a backdrop of global market volatility, fee compression, and evolving investor preferences. Yet experts say the GCC has carved out a unique position, with sovereign wealth funds providing resilience and retail participation offering depth. "The next decade's leaders will be those who redefine their future, not just endure challenges," said Lukasz Rey, managing director and partner at BCG and Middle East head of financial institutions. "With Saudi Arabia and the UAE anchoring regional momentum, the GCC's strategic diversification and SWF dominance signal a future where local asset managers could rival global giants."

Saudi Arabia and the UAE remain the anchors of this growth, together accounting for the bulk of retail mutual fund expansion. Saudi Arabia's Capital Market Authority has introduced reforms to deepen liquidity and strengthen the investment environment, while the UAE has seen robust inflows into funds tied to its rapidly expanding capital markets, including Dubai's IPO boom and Abu Dhabi's ADX growth. Kuwait and Abu Dhabi, meanwhile, remain the dominant players in sovereign wealth, led by the Kuwait Investment Authority and the Abu Dhabi Investment Authority, which are among the largest sovereign funds globally. Collectively, SWFs in the GCC control more than $4 trillion in assets, with increasing allocations to alternative investments and sustainable finance.

Analysts say the GCC's AuM growth of 9 per cent in 2024 outpaced the global average of 7 per cent. Much of this increase was driven by market performance rather than fresh inflows, underscoring the region's exposure to global equity swings. Still, experts believe the structural story remains intact. "Saudi Arabia and the UAE are driving retail mutual fund expansion, while Kuwait and Abu Dhabi lead in sovereign wealth fund dominance," said Mohammad Khan, managing director and partner at BCG. "The region is steadily establishing itself as a global financial powerhouse."

One notable trend has been the rise of private assets, traditionally the domain of institutions but now attracting retail investors. Globally, semi-liquid private funds have grown more than fivefold in four years to surpass $300 billion, with GCC investors increasingly participating in these vehicles. In Saudi Arabia, the Public Investment Fund (PIF) has been a catalyst, channeling capital into domestic infrastructure and technology while also investing heavily abroad. Similarly, Mubadala and ADQ in Abu Dhabi have been active in renewable energy, life sciences, and advanced manufacturing - sectors aligned with their respective national diversification visions.

Experts argue that the sector's future growth will hinge on its ability to adapt to three structural forces reshaping the industry worldwide: evolving investor demand, consolidation, and digital disruption. On the demand side, active exchange-traded funds (ETFs), model portfolios, and separately managed accounts are emerging as areas of opportunity. Consolidation is already under way, with larger players leveraging scale to expand offerings and cut costs. Smaller firms are increasingly turning to niche strategies and leaner models to stay competitive.

Technology is perhaps the most transformative force. Asset managers are investing in artificial intelligence, particularly generative AI, to automate portfolio management, enhance research, and streamline middle- and back-office operations. "Cost discipline is now a strategic focus, with firms prioritising unique value creation, embracing lean practices, and investing in transformative technologies," said Nabil Saadallah, managing director and partner at BCG.

Industry insiders note that pension funds and sovereign wealth funds are "quietly reshaping the region's financial architecture" by becoming more active and sophisticated allocators. Saudi pension funds, for example, are diversifying away from traditional fixed income into equities, private markets, and global infrastructure. This not only supports the domestic economy but also integrates the GCC more deeply into global capital flows.

The GCC's evolution as an asset management hub also reflects broader economic reforms. Saudi Arabia's Vision 2030 has spurred capital market deepening and foreign investor participation, while the UAE has positioned itself as a global fintech and investment hub through regulatory innovation and attractive free zones such as DIFC and ADGM. The IMF projects GCC non-oil GDP growth at 4.3 per cent in 2025, reinforcing the link between economic diversification and capital market vibrancy.

At the same time, the industry must manage challenges. Fee pressure continues to erode margins, forcing managers to rethink value propositions. Global investors are increasingly demanding sustainable and ESG-focused products, an area where GCC managers are beginning to respond, particularly in renewable energy-linked funds. Furthermore, volatility in global markets - from US rate uncertainty to China's slowing growth - could affect inflows and performance.

Despite these risks, the outlook remains broadly positive. According to Preqin, assets under management in private markets worldwide are expected to reach $24 trillion by 2028, and the GCC is positioning itself to capture a meaningful share of that growth. Regional SWFs are already among the most active investors in private equity, venture capital, and infrastructure, while retail investors are steadily being drawn into professionally managed products.

In a region once heavily reliant on hydrocarbons, the rise of a $2.2 trillion asset management sector signals both resilience and reinvention. As BCG's Rey put it, "The GCC has the ingredients - sovereign fund strength, retail momentum, and diversification strategies - to not just withstand global market volatility, but to emerge as a serious competitor to the world's leading asset managers in the decade ahead."

Khaleej Times