Tuesday, Jun 28, 2016

Dubai: Private wealth in the UAE is projected to post a compound annual growth rate (CAGR) of 14.1 per cent to reach almost $1 trillion in 2020; over the next five years, private wealth held by ultra-high-net-worth households in the Emirates is also expected to increase by a staggering 20 per cent, according to a new report by The Boston Consulting Group (BCG).

In the UAE, the growth of private wealth was driven primarily by cash and deposits. In fact, between 2014 and 2015, the amount of wealth held in cash and deposits increased by 16.7 per cent across the nation, compared with 0.7 per cent for bonds, and 3.8 per cent for equities according to BCG’s report, Global Wealth 2016: Navigating the New Client Landscape.

Based on BCG’s study, the UAE is set to show solid growth in the next five years, with the wealth breakdown anticipated to be 19.2 per cent in equities, 12.1 per cent in cash and deposits, and 4.8 per cent in bonds.

BCG study outlines key industry trends and explores evolving client needs — particularly those of underserved, non-traditional segments such as female investors and millennials.

“Segmentation approaches based mainly on wealth level continue to be used by the majority of wealth managers, neglect what clients are truly willing to pay for,” said Markus Massi, Partner & Managing Director of BCG Middle East’s Financial Services practice. “Such approaches no longer allow wealth managers to capitalise on the full potential of the market.”

According to the report, over the next five years, wealth in the Middle East and Africa region is set to reach $11.8 trillion — and the UAE, Saudi Arabia, and Kuwait’s contribution will account for 22.7 per cent of that sum.

In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in the UAE grew slightly — by 6.3 per cent — in 2015. However, by 2020, private wealth held by this specific segment is expected to increase by a healthy 20 per cent.

In the UAE, private wealth held by the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) grew at a rate of 11.8 per cent in 2015. It is projected to grow by 18.2 per cent over the next five years.

Interestingly, in the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed the highest growth in 2015. Private wealth in that segment soared by an impressive 13.6 per cent in 2015 and with a projected CAGR of 16.5 per cent over the next five years; this segment will continue to undergo significant growth.

The total number of millionaire households (those with more than $1 million in net investable assets) in the UAE went up by 8.5 per cent in 2015. Looking ahead, it is set to grow by another 7.9 per cent by 2020.

Global growth of private wealth moderates

Dubai: Global private financial wealth grew by 5.2 per cent in 2015 to a total of $168 trillion, according to Boston Consulting Group’s (BCG) annual wealth report. Global Wealth 2016: Navigating the New Client Landscape.

The increase was less than a year earlier, when global wealth rose by more than 7 per cent. All regions except Japan experienced slower growth than in 2014. Unlike in recent years, the bulk of global wealth growth in 2015 was driven by the creation of new wealth (such as rising household income) rather than by the performance of existing assets, as many equity and bond markets stayed flat or even fell.

While growth in the US and Europe showed declining trend, Asia-Pacific reported strong growth in private wealth. In Asia China and India are showing strong growth through 2020, with India expected to have the highest growth annually.

Assuming that equity markets regain momentum, private wealth globally is expected to rise at a compound annual growth rate of 6 per cent over the next five years to reach $224 trillion in 2020. The number of global millionaire households grew by 6 per cent in 2015, with several countries, particularly China and India, seeing large increases.

By Babu Das Augustine Banking Editor

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