UAE, Saudi Arabia Control 74% Of GCC’s Private Wealth

Most of the GCC region’s private wealth (74 per cent) is controlled by affluent individuals in Saudi Arabia and the UAE, according to a new study by Strategy&, formerly Booz & Company.

The study estimated that there are nearly 1.6 million wealthy households in the GCC, with total investable assets worth $2.2 trillion.

Out of these, around 44 per cent of wealth resided in Saudi Arabia while 30 per cent resided in the UAE, as of 2013.

Private wealth in Saudi Arabia and the UAE has increased over the last few years from 71 per cent in 2009 to 74 per cent in 2013, Strategy& 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,” said Daniel Diemers, partner with Strategy& in Dubai.

“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.”

During the same time frame, wealth creation for HNWIs in the region, at 76 per cent and 94 per cent for UHNWIs, was hardly anemic, he added.

The study also noted that the overall private wealth in the region doubled from $1.1 trillion in 2010, growing at a CAGR of 17.5 per cent to reach $2.2 trillion by 2014.

The increase mirrors a general trend of rising wealth in the region, with the number of affluent households rising by 50 per cent between 2010 and 2013. In this period, the UAE saw the largest wealth growth, with the number of affluent households rising from 16 per cent in 2009 to 26 per cent in 2013.

Strategy& attributed the GCC’s private wealth growth to various macroeconomic and socio-demographic factors.

“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,” said Jihad K. Khalil, senior associate with Strategy& in Dubai.

“From 2009 to 2013, global equities saw 50 per cent 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.”

Part of the wealth generated through strong GDP growth and high oil revenues has been poured into infrastructure building in the Gulf states, resulting in more income for wealthy individuals, he added.

The study also found that an escalation of geo political tension in the region over the last few years had contributed to the migration of new wealth to the region, boosting overall wealth figures.

Following the Arab Spring in 2011, many wealthy households shifted their wealth to more stable countries such as 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 report said.

“The UAE has benefited from this regional phenomenon the most and seen the largest inflows from the wider Middle East and North Africa region.”

Sluggish growth in Western countries and turmoil in the international financial services industry also led many Middle Eastern investors to return to the region.