Complex Made Simple

B2C, B2B asset management and Robo-advisory in the region

From asset management to robo-advisory, we look at how COVD-19 is changing the way we look at how money needs managing and who the players are, old and new in the region

Most of us simply aren’t investing enough in pensions or other long-term savings vehicles Stashaway becomes the first Robo-advisor) to get an asset license from the Dubai Financial Services Authority Wahed, described itself as a digital Islamic investment platform and as the world’s first “halal robo adviser.”

From asset management to robo-advisory, we look at how COVD-19 is changing the way we look at how money needs managing and who the players are, old and new in the region.

This comes as a report emerges showing that oil price war and the coronavirus pandemic will have a severe impact on the UAE investment market.
 The UAE has a strong preference for deposits, which will keep growth on the up in 2020, the report says.

Slow time investing for B2C purposes

Alex Hoctor, Duncan, Global Head of Aberdeen Standard Investments, wrote “Money in the bank isn’t what it used to be.”

Central banks have been forced to slash interest rates in response to trade tensions, geopolitics, and COVID-19. Most Gulf central banks tend to follow the US Fed because their currencies are pegged to the US dollar. 

The Bank of England has been sounding out the prospect of negative rates, already adopted by the European Central Bank and countries such as Denmark, Switzerland, and Japan. So the prospect of paying banks to keep hold of customer deposits is now very real.

“It should be a wake-up call to those who have money sitting in the bank rather than working for them in investments,” Hoctor said.

“Most of us simply aren’t investing enough in pensions or other long-term savings vehicles.”

Expatriates in the GCC have their retirement needs serviced by the end of service gratuity, the average length of retirement is growing rapidly and therefore becoming more costly.  

The global gap between pensions expectations and actual provision stands at around $70 trillion and the World Economic Forum’s projections show this gap growing by 5% each year to around $400 trillion by 2050.

“We can think of our lives as having 250 months of growing, 500 months of working, and another 250 months thereafter. The aim for all of us should be to use the 500 months of work so that we are no longer dependent on jobs for our income thereafter,” Hoctor opined.

“That’s where asset managers come in. The industry must innovate in response to low expected returns. Diversification is vital, multi-asset solutions are crucial, and costs must be kept low.”  

B2B asset dealing and wheeling 

Abu Dhabi’s Mubadala, which manages $232 billion in assets, has been making noise mostly investing, but also divesting from local and international markets, during September, October, and into November, with deals totaling billions and focusing on tech, oil&gas, and healthcare.

Aldar Properties is looking into buying assets that would boost its management units as the largest listed developer in the United Arab Emirates. Aldar primarily operates in Abu Dhabi where oversupply is less severe than in Dubai where a six-year slump has driven values lower by 30%.

Aldar operates across multiple asset classes, whether it’s schools, offices, homes, or hotels.

Meanwhile, the Apex Group has been appointed to provide fund administration to the $200 million Financing Opportunities Fund (FOF) of UAE-based asset manager and banking platform SHUAA Capital.  

Fund administration services will include financial reporting, investor communication, capital transactions, and accounting support. 

The FOF is targeting special situations in the GCC and has already attracted a total of $68 million in commitments from investors.

The deal expands Apex’s existing relationship with SHUAA who announced the launch of three Sharia-compliant funds in Abu Dhabi Global Market (ADGM) that already secured $75 million of commitments and are also administered by Apex.    

Robo advisory funding and growth 

Globally, it is estimated that between $2.2trn and $3.7trn in assets will be managed by robo-advisory services by 2020.  

Stashaway has rolled out its platform in the UAE where it has become the first digital wealth manager (Robo-advisor) to get an asset management license from the Dubai Financial Services Authority (DFSA) with retail endorsement.

“The UAE has a large mass affluent segment that has had to rely on traditional investment products that are often expensive and generic. We identified this gap in the market for sophisticated, accessible, global investment options in UAE and the wider MENA region,” Ramzi Khleif, Stashaway MENA general manager, said in the announcement.

Stashaway has seen its assets under management (AUM) grow more than 4.3 times in the last 12 months offering a data-driven digital wealth management platform with no minimum balance, no sales charge, while management fees range between 0.2–0.8%.

The company has so far raised $36.4 million across four funding rounds.

In January this year, Robo-advisor Sarwa announced it raised more than $8.4 million by major investors like Kuwait Projects Company, holder of consolidated assets of more than $30 billion, and DIFC, Vision Ventures from Saudi, and Hambro Perks from the UK.

This new round brought Sarwa’s total funding to over $10 mn since its inception in December of 2017 by Co-founders Mark Chahwan, Jad Sayegh, and Nadine Mezher. 

The company officially launched its platform in February 2018 and has since known a monthly growth of over 20%. They have currently reached more than 10,000 registered users.

Meanwhile, in March 2020, UAE-based portfolio manager Wealthface launched a robo-advice indexing platform for passive investors in the MENA region.

The platform enables investors to trade in high-value stocks by offering fractional shares within exchange-traded funds (ETFs).

The firm has also teamed up with US-based digital trading vendor DriveWealth to provide its clients with access to US markets. 

This follows its recent grating of a license from both the Securities and Exchanges Commission in the US and the Abu Dhabi Global Markets.

And in June this year, New York-based fintech startup Wahed, described itself as a digital Islamic investment platform and as the world’s first “halal robo adviser.”

It closed a $25 million investment round led by Saudi Aramco Entrepreneurship Ventures. The platform is currently running in the U.S. and U.K. and has more than 100,000 clients globally.  The three-year-old company has already received a license to operate in Saudi and aims to get regulatory approval in 20 countries.

According to Crunchbase, Wahed has raised a total of $40 mn in funding since its 2015 founding.

In 2019, Saudi’s capital market regulator gave approval for two companies to test the use of computer-generated advice for investors. Wahed Capital and Haseed Investing.