QFC Authority, FTSE Global Markets release results of Q3 2012 MENA Asset Management Survey

This third survey was conducted between July 25th and September 20th this year. Some 393 firms were approached for information of which 84 responded, either by phone, fax or email. From these returns we have extrapolated the analysis of the responses of asset managers, with an acknowledged $74,883m worth of assets under management (AUM).

Although quarter on quarter trends in asset allocation can obscure longer term structural changes in geographic preferences of investment firms, because the MENA region has been subject to socio-political disruption through 2011-2012, we expected more dynamism among investors in terms of geographic asset allocation.

While there are clear national differences in the way that investors approach investment to the MENA region, there is a clear disposition among survey respondents to invest locally. Over one third of respondents have all their assets invested in the Middle East and North Africa. Only a handful claimed to have none invested in MENA. The survey finds too that there is also more dynamism in asset allocation among those funds with approximately 80% of their portfolio in the domestic market. They exhibit a marked willingness to shift capital when necessary. In this regard, the survey is an important bellwether of the shifts in investor thinking about political/market risk.

Investors remain positive about Saudi Arabia. The survey also finds that investors have noted the improving fortunes of the UAE states, and have now brought the emirates on par with Qatar in terms of overall investor sentiment (please see the chart below). Qatar alone had been the second most popular investment destination in the first quarter survey. Respondents to this latest survey also think that future investments in Egypt will be dependent on the country coming to terms with the IMF. Political deadlock in Kuwait has also had a negative effect on investor approaches to the country. As an investor in Saudi Arabia says, "It is all about sentiment and hope."

The survey also shows a growing desire by the region's investors to enjoy region-wide consistency in regulation and passportable investment product; a fact that should provide the region's law-makers with food for thought. Particularly in the GCC, the region's investors see the potential for market liberalisation, new investment product and harmonized regulation to help deepen both the region's capital markets and offer end-investors improved and more efficient investment products.

"It is heartening to hear investors desirous of the opportunity to offer their clients improved and more cost-effective investment products. The region's investment market shows the potential that can be achieved by working and investing cross-border and, at the same time, driving and encouraging local market change, which is how it should be," says Francesca Carnevale, Editor, FTSE Global Markets.

Shashank Srivastava, CEO of the QFC Authority, says, "Despite the global financial crisis, a diversified and increasingly sophisticated asset management industry has emerged in the GCC over the past decade. Qatar is playing a central role in the development of this industry with asset managers recognising the attractions of the compelling Qatar growth story and the unique opportunities Qatar offers. It is the fastest growing economy in a fast-growing region, has a savings rate of approximately twice the global average and one of the highest proportions of High Net Worth Individuals in the world. And Qatar's world class tax, regulatory, legal and business environment provides clarity and certainty for asset management businesses looking to establish themselves within the QFC environment."

The next quarterly survey will concentrate on the deepening of the region's investment infrastructure and the findings will be released in January 2013.