RIYADH: According to research conducted by an American company called Boston Consulting Group, the value of assets managed in the Middle East reached $1.3 trillion in 2022, despite the fact that the world economy was experiencing headwinds at the time.
According to BCG’s most recent annual study on asset management, titled “Global Asset Management 2023: The Tide Has Turned,” this reflects a compound annual growth rate of 7 percent.
“While performing relatively better than their European and American peers, the asset management industry in the Middle East has arrived at a critical juncture,” said Markus Massi, Managing Director and Senior Partner at BCG. “This is compelling leaders to reassess their organizations’ operations to regain the profit growth they experienced in the previous years,”
In addition, he stated that “Central banks around the globe are no longer engineering sustained market appreciation.” Their short-term objectives are diametrically opposed to ours: they want to reduce growth in order to fight inflation, which will have an effect on financial markets, in particular equity markets.
Given the existing pressures and market expectations, the analysis found that annual profit growth for global asset managers will be approximately half of what has been the average increase for the industry over the past few years.
According to the findings of the analysis, asset managers will need to reduce their overall costs by twenty percent and adjust their revenue mix so that at least thirty percent of their revenue comes from higher-margin products in order to achieve their goal of returning to previous levels.
According to the report, the most important priority for the leadership team should be to place an emphasis on profitability, private market prospects in high-growth alternative investments, and tailored client experiences. This will allow the company to survive in the years to come.
According to the paper, increasing profitability may be accomplished by first gaining an understanding of the drivers and expenses associated with each function, and then implementing several efforts designed to optimize costs rather than simply reducing spending.
Concerning the private markets, businesses should pursue high-growth alternative investments and realize potential prospects in the private market.
Asset managers in the Middle East should target possibilities in the private market because investors in the region have a strong preference for private assets and there are few other alternative investment tools available.
According to the findings of the analysis, modern technologies have the potential to improve the efficiency and effectiveness of personalisation in the context of the sales and marketing process. This, in turn, can lead to an increase of around twenty percent in the number of sales conversions achieved.
According to Principal at BCG Farouk El-Hosni, “in an environment where growth is no longer guaranteed, where fees are being compressed, and where passive investing is increasingly popular, the Middle East’s asset management industry is facing a crucial turning point.”
He came to the conclusion that “in point of fact, it is now time for leaders to reexamine the strategies of their organizations in order to take their fair share in the growth of the market and accelerate profit contributions.”