The Middle East region's wealthy, who hold the world’s highest share in investable assets, are set to increase their fortunes in this category, with their number rising at the fastest rate from all regions by 2022, according to a Boston Consulting Group report.
The number of affluent individuals in the Middle East holding investable assets will grow 14.1 per cent between 2017 and 2022 to reach 1,460,000, the consultancy said in a report. Globally, the number of the wealthy individuals that hold these assets will increase 7.4 per cent to 101,831,000 during the same period.
Affluent individuals are defined as those with assets ranging between $250,000 and $1 million. Investable assets include listed equity, bonds, investment funds, currency and deposits and other smaller asset classes, as opposed to non-investable assets, which are life insurance and pensions, unlisted equity and other equity classes.
In 2017, the region’s wealth was 82 per cent concentrated in investable assets compared with the global figure of 60 per cent.
Wealth accumulation in the energy-rich Middle East took a hit two years ago due to the oil price slump that started mid-2014 and saw prices plunge from $115 a barrel to less than $30 a barrel in the beginning of 2016.
Oil prices have since recovered, touching a three-year high of $80 a barrel last month thanks to global oil curbs that have culled 1.8 million barrels of oil per day from the market, pushing down oil inventories to below their five-year average, according to Opec. The oil pact is in place until the end of this year.
The wealth of the Middle East and Africa region combined is forecast to grow between 8 and 10 per cent compound annual growth rate over the next five years, according to BCG.
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Global wealth is forecast to grow at a CAGR of 7 per cent by 2022 from 2017 if the current wealth expansion patterns continue, with the lion’s share of growth coming from equities and investment funds.
The wealth of the Middle East grew 11.8 per cent in 2017 to $3.8 trillion from $3.4tn a year earlier. The growth was in line with the global year-on-year growth of 12 per cent to $201.9tn in 2017.
Wealth per capita in the Middle East will also rise, reaching $25,000 in 2022 from $18,000 in 2017 compared with a global average of $53,000 in 2022, up from $40,000 in 2017.
Globally wealth grew in 2017 thanks to a bull equity market in all major economies and the strengthening of currencies of these economies against the US dollar. Most of the growth was derived from equities and investment funds. North America held almost 43 per cent of global wealth in 2017, followed by Western Europe with 22 per cent.
“The share of global wealth held by millionaires increased to almost 50 per cent in 2017, compared with just under 45 per cent in 2012, driven mainly by higher-wealth individuals investing in higher-return assets,” the report said. “Overall asset distribution by wealth segment varied widely across regions.”
Global offshore wealth in 2017 grew 6 per cent to $8.1tn, with Switzerland maintaining its top spot with $2.3tn in domiciled personal wealth. It was followed by Hong Kong and Singapore.
The UAE’s offshore market, valued at $500 billion, has grown at a CAGR of 4 per cent between 2012 and 2017.
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UAE currency: the story behind the money in your pockets
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December 2014: Former UK finance minister George Osbourne reforms stamp duty, replacing the slab system with a blended rate scheme, with the top rate increasing to 12 per cent from 10 per cent:
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July 2020: Rishi Sunak unveils SDLT holiday, with no tax to pay on the first £500,000, with buyers saving up to £15,000.
March 2021: Mr Sunak decides the fate of SDLT holiday at his March 3 budget, with expectations he will extend the perk unti June.
April 2021: 2% SDLT surcharge added to property transactions made by overseas buyers.
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Tony Booth, professor of education
Lord Browne, former BP chief executive
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Gina MIller, anti-Brexit campaigner
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How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
Highlighting the role technology has played in encouraging millennials and Gen Z to invest, he says: “They were often excluded, but with lower account minimums ... a customer with $1,000 [Dh3,672] in their account has their money working for them just as hard as the portfolio of a high get-worth individual.”
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