Personal wealth in the UAE is projected to continue to grow at eight per cent compound annual growth rate (CAGR) to Dh2.16 trillion ($590 billion) in investable assets by 2022, says a new report.
According to Boston Consulting Group's latest research released on Tuesday, nearly half of private wealth in the UAE is kept in currency. The remaining private wealth is allocated for life insurance, pension, equities and investment funds.
"When it comes to asset allocation, currency and deposits - at 46 per cent - were the highest proportion of assets in the UAE in 2017, followed by life insurance and pensions at 15 per cent and equities and investment funds at nine per cent. For the most part, this asset allocation is expected to experience slight growth by 2022, with currency and deposits, life insurance and pensions, and equities and investment funds projected to reach 48 per cent, 17 per cent and 11 per cent, respectively," said Markus Massi, senior partner and managing director of BCG Middle East's Financial Services practice.
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Massi expects non-investible assets to increase at a CAGR of 11 per cent in the next five years, while investible wealth growth is projected to remain constant at a CAGR of seven per cent in the UAE.
In the Middle East, personal wealth rose by 11 per cent to Dh13.96 trillion ($3.8 trillion) in 2017.
Globally, personal financial wealth grew by 12 per cent to Dh741 trillion ($201.9 trillion) last year, with wealth in equities and investment funds showing strong growth. The US controls highest personal wealth in the world at $80.5 trillion followed by China, Japan, UK, Germany, France, Canada, Italy, Australia and South Korea.
Anthony Hobeika, CEO of Mena Research Partners, said UAE not only ranks as the major offshore wealth centre in the region, but it is also now a growing global wealth hub, just trailing geographies such as Switzerland, Singapore, Hong Kong and UK.
Hobeika attributed the UAE's high ranking among global offshore centres to political stability, world-class regulatory framework, ease of doing business, leisure and personal considerations, high-quality lifestyle and low tax rates.
Surandar Jesrani, managing partner and CEO, Morison MJS Tax Consultancy, said the UAE government recognises the importance of the correct regulatory and commercial climate to foster influx of investment into the UAE in various forms.
Rajiv Kumar, senior executive officer, PhillipCapital (DIFC) Pvt Ltd, said high service quality, diverse product offerings, political stability, geographical advantage and attractive locations make UAE a top investment destination.
"The improvement in its financial service infrastructure, regulatory framework, geographical advantage, political stability, fast growth in infrastructure and globally competitive wealth management centres make the UAE special. The UAE is considered one of the most business-friendly and well-regulated countries by investors across the globe. Capital and wealth inflows to the UAE is a natural result of the business friendly environment which is being refined regularly," he said.
Kumar said private wealth is mainly held in cash, bonds, equities, structured products, financial derivatives and real estate to name a few.
For high net worth individuals, he said, the UAE is politically, socially and economically stable unlike other regional countries. "There is ease of entry and exit with minimum red tape and regulatory bottlenecks in the UAE. Also, the absence of taxes on corporate and personal income plays an important role."
According to BCG, the UAE is among the world's top 10 countries, which hold the highest offshore wealth with regional Arab countries emerging as the top source for this wealth.
The UAE holds Dh1.835 trillion ($500 billion) offshore wealth, becoming 6th largest offshore centre in the world with Saudi Arabia, Iraq and Iran emerging as the top three sources of the offshore wealth.
Currently, Switzerland tops, controlling $2.3 trillion offshore wealth followed by Hong Kong ($1.1 trillion), Singapore ($900 billion), the US ($700 billion) and Channel Islands and Isle of Man ($500 billion).
Among the top 10 countries, Saudi Arabia and China are the two biggest source of offshore wealth in foreign countries. Bahrain is the 10th largest offshore wealth centre in the world with $200 billion assets.
