Revealed: Where UAE millionaires will park $1 trillion

Private wealth in the UAE is projected to grow at a compound annual growth rate of 10.7 per cent to reach an estimated $1 trillion in 2019 with nearly half of it parked in equities followed by cash and deposits, according to a new report by The Boston Consulting Group (BCG).

Over the next five years, across the UAE, private wealth held in equities is expected to increase at a CAGR of 18.5 per cent. In parallel, bonds as well as cash and deposits will grow by 3.8 and 6.2 per cent, respectively.

The study, titled Global Wealth 2015: Winning the Growth Game, also revealed that in the UAE, private financial wealth grew by 8.4 per cent in 2014, driven mainly by surge in equities.

After all, between 2013 and 2014, the amount of wealth held in equities rose by 13.8 per cent across the nation, compared with 1.6 per cent for bonds, and 6.9 per cent for cash and deposits.

Based on BCG’s study, the UAE is poised for further growth in the next five years, with the wealth breakdown anticipated to be 43 per cent in cash and deposits, nine per cent in bonds, and 47 per cent in equities.

“In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in the UAE grew by nine per cent in 2014, on the back of dynamic equity markets and a growing economy," said Markus Massi, a Partner & Managing Director at BCG Middle East.

"Private wealth held by the UHNW segment is set to soar by an impressive 21.1 per cent by 2019. Interestingly, in the UAE, the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) witnessed the highest growth in 2014."

Private wealth in that segment rose by a healthy 16.1 per cent in 2014. With a projected CAGR of 12 per cent over the next five years, this segment is expected to see continued growth. This will be triggered by both a large number of new households entering the segment and growth in average wealth per household.

In the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) grew at a slightly lower rate (9.1 per cent) in 2014. It is forecasted to grow by 12.9 per cent over the next five years.

"The total number of millionaire households (those with more than $1 million in private wealth) in the UAE increased by 5.5 per cent in 2014," remarked Massi. "Looking ahead, it is set to grow another 5.3 per cent by 2019."

Regional growth

The Middle East and Africa (MEA) region had the second-highest proportion of newly created wealth (44 per cent), with the balance of the increase in wealth attributable to the market performance of existing assets.

Solid savings rates and continued GDP rises in oil-rich countries such as Saudi Arabia (GDP growth of 11 percent), Kuwait (11 percent), and the UAE (11 per cent) contributed to the newly created wealth, while existing asset performance was solid despite the region’s political instability.

Private wealth in the Middle East and Africa (MEA) region increased by more than 9 per cent to reach nearly $6 trillion in 2014. With a projected CAGR of 9 per cent, the region's private wealth will rise to an estimated $9 trillion in 2019 with the UAE ($1 trillion) and Saudi Arabia ($2 trillion) as the largest markets.

While 2014 continued to see strong double-digit equity performance in the MEA, the year was also positive for onshore bonds with double-digit performance in the region.

In addition, the MEA region had the second-highest proportion of newly created wealth (44 per cent), with the balance of the increase in wealth attributable to the market performance of existing assets.

"Solid savings rates and continued GDP rises in oil-rich countries contributed to the newly created wealth, while existing asset performance was solid despite the region's volatile developments," said Massi. "Overall, across the region, the drivers of wealth growth will have significant implications for wealth managers in the years ahead."

Globally, private financial wealth grew by nearly 12 per cent in 2014 to reach a total of $164 trillion.

Almost three-quarters (73 per cent, or $13 trillion) of private wealth growth was generated by the market performance of existing assets, with the balance (27 per cent, or $5 trillion) generated by newly created wealth.

 

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