Private wealth in the UAE is projected to post a compound annual growth rate (CAGR) of 14.1 per cent to reach almost $1 trillion by 2020, according to a new report by the Boston Consulting Group, or BCG.
The report also predicted that private wealth held by ultra-high-net-worth households in the country is expected to increase by a 20 per cent over the next five year. Last year, private wealth in the UAE witnessed robust growth of 10.2 per cent.
In the UAE, the growth of private wealth was driven primarily by cash and deposits. In fact, between 2014 and 2015, the amount of wealth held in cash and deposits increased by 16.7 per cent across the nation, compared with 0.7 per cent for bonds, and 3.8 per cent for equities.
According to BCG’s study, the UAE is set to show solid growth in the next five years, with the wealth breakdown anticipated to be 19.2 per cent in equities, 12.1 per cent in cash and deposits, and 4.8 per cent in bonds.
“Segmentation approaches based mainly on wealth level continue to be used by the majority of wealth managers, neglect what clients are truly willing to pay for, said Markus Massi, Partner & Managing Director of BCG Middle East’s Financial Services practice.
“Such approaches no longer allow wealth managers to capitalise on the full potential of the market,” Massi said.
Over the next five years, wealth in the Middle East and Africa region is set to reach $11.8 trillion — and the UAE, Saudi Arabia, and Kuwait’s contribution will account for 22.7 per cent of that sum. In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in the UAE grew slightly — by 6.3 per cent— in 2015.
In the UAE, private wealth held by the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) grew at a rate of 11.8 per cent in 2015. It is projected to grow by 18.2 per cent over the next five years.
The total number of millionaire households (those with more than $1 million in net investable assets) in the UAE went up by 8.5 per cent in 2015. Looking ahead, it is set to grow by another 7.9 per cent by 2020.
The findings of BCG’s report also revealed that, in 2015, for Middle East and Africa wealth booked offshore, Switzerland (30 per cent) was the destination of choice, followed by the UK (23 per cent) and Dubai (18 per cent).
Across the world
Global private financial wealth grew by 5.2 per cent in 2015 to a total of $168 trillion, according to the report.The rise was less than a year earlier, when global wealth rose by more than seven per cent. All regions except Japan experienced slower growth than in 2014. Unlike in recent years, the bulk of global wealth growth in 2015 was driven by the creation of new wealth rather than by the performance of existing assets, as many equity and bond markets stayed flat or even fell.
Assuming that equity markets regain momentum, private wealth globally is expected to rise at a compound annual growth rate of 6 per cent over the next five years to reach $224 trillion in 2020. The number of global millionaire households grew by 6 per cent in 2015, with several countries, particularly China and India, seeing large increases.