Geopolitical tensions and market volatility have emerged as the top concerns for asset managers in the GCC countries, according to a new survey by Moody’s Ratings.

The shift reflects growing unease about regional instability, particularly following the recent conflict between Israel and Hamas, and global economic uncertainty.

However, the still-elevated oil prices, which underpin regional economies, are providing a buffer.

The Moody’s survey of chief investment officers (CIOs) found that most expect inflows and assets under management (AUM) to remain broadly stable despite the heightened anxieties.

“Geopolitical issues and market fluctuations have displaced inflation as survey respondents’ principal worries,” Moody’s noted.

Equity market volatility has been pronounced this year, driven by global economic headwinds, while the Middle East has seen increased tensions due to the Israel-Hamas conflict.

Despite a pullback from their 2022 peak, oil prices remain relatively strong. A large majority of CIOs surveyed believe the price dip will have minimal impact on asset valuations and fund inflows in the hydrocarbon-rich GCC region. This continued strength is a key factor supporting the positive outlook for AUM.

Looking ahead, competition is expected to intensify. Eighty per cent of respondents anticipate at least a modest increase in competition, fuelled by growing interest in the GCC from foreign asset managers. New regulations designed to attract foreign investment and enhance transparency are also playing a role. Local firms are responding by prioritising digital innovation to meet client demand for sophisticated online services.

The survey also suggests that profitability should remain steady. All respondents forecast at least a modest rise in fee income, driven by new inflows and positive investment performance. This is expected to offset rising operating costs, increased competition, and the growing popularity of lower-margin passive investment strategies.

Demand for Islamic financial products and investments with environmental, social, and governance (ESG) objectives is also expected to see moderate growth, with 80pc of CIOs predicting an increase. However, while ESG-focused funds are attracting inflows, they are not yet considered a strategic priority for most firms.

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