Markaz Sector Report
MENA Asset Management
Trends & Issues in MENA Asset Management Industry
Research Highlights:
Analyzing the state of MENA asset management industry in
terms of fund performance, market size, regulations and
challenges.
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Research
Support
M.R. Raghu CFA, FRM | Head of Research [email protected]
N.C. Karthik Ramesh | Manager - Research [email protected]
Rajesh Dheenathayalan | Research Analyst [email protected]
Jenevivu Lasrado | Secretary, Research [email protected]
Nael Aboul Huda | Manager, Media & Communications [email protected]
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Table of Contents
1. Executive Summary ... 6
2. Key Questions and Policy Actions to be addressed ... 8
What prevents the growth in Assets under Management? ... 8
When will Saudi Arabia and Kuwait be part of MSCI Emerging Market Index? ... 9
What is ailing the debt market in the region and what can be done to improve it? ... 10
Why ETFs aren’t popular in the MENA region? ... 11
Why is liquidity so low in the region? ... 11
How to attract foreign investments? ... 12
What could be Key innovation areas in MENA asset management industry? ... 13
Can Mutual funds outsize Managed accounts in terms of assets? ... 14
3. Industry Architecture ... 15 Research ... 15 Product Range ... 16 Marketing/Distribution of Funds ... 16 Operational Support ... 18 Risk Management ... 18 4. SWOT Analysis ... 20 5. Market Structure ... 21 Leadership Position ... 22 Cost ... 23 Domicile ... 24 Specialized Funds ... 24 Managed Assets ... 25
6. Saudi Arabian Funds ... 27
7. Morocco Funds ... 29
8. Egypt Funds ... 31
9. Kuwait Funds ... 33
10. Tunisia Funds ... 35
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12. GCC Funds ... 39 13. Lebanon Funds ... 41 14. UAE Funds ... 43 15. Oman Funds ... 45 16. Qatar Funds ... 47 17. Iraq Funds ... 49 18. Jordan Funds ... 51 19. Bahrain Funds ... 5320. Challenges to the Industry ... 55
Elusive Growth ... 55 Political Risk ... 56 Benchmark Issues ... 56 Fund Size ... 57 Marketing/Distribution of Funds ... 57 Fluidic Regulations ... 57 21. Regulatory Developments ... 58 22. Appendix ... 65
Appendix 1: Global Asset Management Industry Overview ... 65
Appendix 2: Estimating the Size of Managed Accounts ... 67
Appendix 3: Consolidated Fund Manager Rankings ... 68
Appendix 4: MSCI Classification Criteria ... 70
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Tables and Charts
TABLES CHARTS
2.1 Current Stance of MSCI 2.1 Portfolio Equity Investment, net (in USD bn) 2.2 Establishment of Corporate Governance Code 3.1 Industry Architecture
3.1 Skewed Sectorial Representation 3.2 Fund Distribution Network 5.1 MENA Asset Management Snapshot 6.1 Saudi Arabia AUM Breakup 5.2 Top Asset Managers in each Geographical Focus 7.1 Morocco AUM Breakup 5.3 Estimating the Size of Managed Accounts (USD
billion) 8.1 Egypt AUM Breakup 6.1 Assets under Management - Summary 9.1 Kuwait AUM Breakup 6.2 Top Fund Managers 10.1 Tunisia AUM Breakup 7.1 Assets under Management - Summary 11.1 MENA AUM Breakup 7.2 Top Fund Managers 12.1 GCC AUM Breakup 8.1 Assets under Management - Summary 13.1 Lebanon AUM Breakup 8.2 Top Fund Managers 14.1 UAE AUM Breakup 9.1 Assets under Management - Summary 15.1 Oman AUM Breakup 9.2 Top Fund Managers 16.1 Qatar AUM Breakup 10.
1 Assets under Management - Summary 17.1 Iraq AUM Breakup 10.2 Top Fund Managers 18.1 Jordan AUM Breakup 11.1 Assets under Management - Summary 19.1 Conventional Equity Fund
11.2 Top Fund Managers 22.1 Global Assets under Management (in USD trillions) 12.1 Assets under Management- Summary 22.2 Middle East & South Africa, Assets under
Management 12.2 Top Fund Managers TABLES (Contd)
13.1 Assets under Management - Summary 17.2 Top Fund Managers
13.2 Top Fund Managers 18.1 Assets under Management - Summary 14.1 Assets under Management - Summary 18.2 Specialized Funds
14.2 Top Fund Managers 19.1 Assets under Management - Summary 15.1 Assets under Management - Summary 19.2 Conventional Funds
15.2 Top Fund Managers 20.1 AUM over the Years (in USD mn) 16.1 Assets under Management - Summary 20.2 Average Fund Size in MENA
16.2 Top Fund Managers 21.1 MENA Independent Capital Market Authorities 17.1 Assets under Management – Summary 22.1 Worldwide Mutual Fund Assets, 2012
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1. Executive Summary
MENA Asset Management Industry manages USD 61.7billion1 in assets in
about 782 funds as of May 31, 2013. Geographically, Saudi Arabian funds account for 35.3% of the total (USD 21.7bn), followed by Morocco mandated funds with 22.6% share. In terms of products, money market fund leads the pack with a 31.5% share, followed by trade finance at 26.7% and equities at 23.3%, while the remainder is in fixed income and specialized funds. Of the total assets, conventional funds manage USD 36.7bn (62%) in assets and rest are Islamic.
In terms of the number of funds, Morocco mandated funds lead the table with 176 funds (22.5%), followed by Saudi Arabia with 122 funds (15.6%). Product wise, there are 332 equity funds, 179 specialized funds, 157 fixed income funds, 82 money market funds and 32 trade finance funds. Similar to trend witnessed in assets under management, there are more conventional funds (583 funds) than Islamic funds (199 funds).
AUM/GDP ratio for half the MENA countries was less than 0.5%, implying lack of mutual fund penetration as an investment option. The MENA asset management market is concentrated among the top asset management companies, with the top 10 asset managers (out of a total of 174 managers) accounting for 54.6% of the total assets being managed. NCB Capital leads the list of large asset management companies with USD 7.39bn in assets (12% market share), followed by Beltone Asset Management with USD 5.52bn in assets (8.9% share). Equity funds in MENA region, on an average, charge 1.47% as fund management fee. This is apart from administration, custodian and performance fees. Morocco equity funds charge the highest management fee at 1.93%, while Egyptian funds charge the least at 0.61%. The performance fee component is almost nonexistent in Moroccan and Saudi equity funds. Management fees for fixed income and money market funds are much cheaper. Moroccan fixed income and money market
1 Assets under Management (AUM) refer to mutual fund assets.
AUM value computed for funds with MENA region or one of its constituent countries as their geographical focus.
MENA Asset Management Industry manages USD 61.7billion in assets in about 782 funds as of May 31, 2013.
AUM/GDP ratio for half the MENA countries was less than 0.5%,
implying lack of mutual fund penetration as an investment option.
Kuwait Financial Centre K.P.S.C. “Markaz” 7
funds charge the highest management fees amongst all at 1.38% and 1.2% respectively.
Considering that local investors make up the bulk of participants in MENA funds, local markets tend to suffice as domiciles for these funds, with respective countries being the most popular choices and accounting for 95% of the total. Demand for ‘Sukuk’ (Islamic bond) as an asset class has been on the rise even among conventional fund managers who are increasingly looking at this option post the devastating Eurozone debt crisis, as the debt here is fully backed by real assets.
Ensuing market volatility and increased political risk has kept risk-averse clients away from the market, resulting in stagnant industry AUMs. Smaller funds sizes and evolving regulations which vary from country to country have constrained business growth. Asset growth and higher fees which had hitherto been driving profitability are fast replaced by cost containment measures.
Policy Action Expected Outcome
Modernize & Unify
Stock Exchanges Boosts market liquidity, limits volatility and enhances confidence for market participants. Attract Foreign
Investment Increased market efficiency, results in increased disclosures and shareholder activism.
Develop Debt Markets Proper pricing of risk with establishment of sovereign yield curve. Secondary market liquidity increases.
Effective Corporate
Governance Companies with good governance enjoy more investor support and confidence and command a premium for their equity.
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Local markets tend to suffice as domiciles with respective countries being the popular choices.
Asset growth and higher fees which had hitherto been driving profitability are fast replaced by cost containment measures.
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