GCC assets under management: a rough ride

This comes from the brilliant MR Raghu of Markaz in Kuwait: Funds in the GCC aren't holding their assets well. Assets under management for GCC funds declined by 46 per cent in the last half of 2008 alone, and lost another 23 per cent in the first quarter of this year.

That doesn't bode well for asset managers in the region, many of whom had hoped that the recent market declines would lead individual investors to seek professional assistance with their portfolios. There is a (slight) silver lining to all this, however. First, a lot of this decline in assets under management is surely attributable to market performance, which had been abysmal across the GCC until the past month or so. Second, Islamic funds, on which plenty of managers have pinned their hopes, aren't declining in assets under management as much as conventional ones.

Here's Mr Raghu's analysis:

GCC markets went through a rollercoaster in 2008, with H1 being positive for the six economies followed by an abysmal second half which saw assets under management (AUM's) of GCC funds contract by a massive 46%. There continues to be a cloud of uncertainty over the local, and international, financial landscape, with equity markets trading sideways, liquidity being tight and good news being somewhat scattered, although governments have shown proactive measures aimed at bolstering their economies. However, AUM's continued to decline in the first quarter of the year; the good news is that the shrinkage seems to have steadied somewhat. AUM's for both country specific and pan-GCC funds contracted by 23% in the QTD period to USD 9.0 bn. The QTD decline was led by Qatar and Kuwait, which saw their AUM's shrink by 29% and 34%, respectively. Saudi Arabia's AUM contraction has moderated though; declining by 10% QTD after plunging 55% between April - December 2008, in line with the market stabilizing. Conventional fund AUM's declined by 26% in the QTD period while those for Islamic funds declined by 19% to USD 3.59 bn. Most Equity funds continued to languish in the red, but there were some gainers in Saudi Arabia and the UAE.