Personal wealth in the UAE has grown at 8 per cent between 2016 and 2017 and is expected to grow at a compounded annual growth rate of 8 per cent over the next five years to reach $590 billion (Dh2.16 trillion) in investable assets by 2022, according to a report by Boston Consulting Group (BCG).

Data from BCG showed global personal financial wealth grew by 12 per cent in 2017 to $201.9 trillion in US dollar terms.

The main drivers included the bull market environment in all major economies with wealth in equities and investment funds showing by far the strongest growth.

The Middle East accounted for the highest share of wealth held in investable assets. Personal wealth in the Middle East rose by 11 per cent to $3.8 trillion in 2017, a significant increase compared with the compounded annual growth rate (CAGR) for the previous five years.

“[The] Middle East continued to maintain strong growth in 2016 to 2017. While all other regions including North America, Western Europe, Asia and Africa showed strong growth, overall, global private wealth was driven primarily by the positive development of equities and investment funds,” said Markus Massi, Senior Partner & Managing Director of BCG Middle East’s Financial Services practice.

In 2017, the US accounted for $80.5 trillion of personal wealth in the world with China accounting for $20.7 trillion. While North America accounted for 14.4 million millionaires in 2017, the Middle East had just about 300,000 millionaires.

Wealth distribution

A closer look at the UAE data showed that the country had 19,983 millionaires accounting for 47 per cent of total individual wealth. While 139 individuals had private wealth in the range of $100 million and $1 billion, 12 people had wealth in excess of $1 billion, accounting for 26 per cent of total individual wealth in the country.

Data on private wealth does not include individuals from ruling families.

“Taking an in-depth look at wealth distribution, UAE non-investible assets are expected 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 7 per cent,” said Massi.

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 offshore assets at 30 per cent, life insurance and pensions at 15 per cent and equities and investment funds at 9 per cent.

As the regulatory climate has tightened over the last decade, there have been significant flows back onshore. In the UAE, this is signified by the expected decrease in offshore assets of 6 per cent between 2017 and 2022.

In terms of growth trends in asset classes, at 15 per cent, equities and investment funds drove overall growth between 2016 and 2017 in the UAE.

While currency and deposits grew 11 per cent, life insurance and pensions a 10 per cent and offshore at 2 per cent last year. As bonds experienced a significant global decline of 10 per cent in portfolios, in the UAE bonds grew by 1 per cent in the 2016 to 2017 period.

Looking to the future, slightly slower but steady growth is projected in equities and investment funds at CAGR of 12 per cent, and currency and deposits at CAGR 9 per cent over the next five years.

In the same period, other asset classes will experience a slight increase including life insurance and pensions at CAGR 11 per cent, offshore at CAGR 3 per cent, and bonds at CAGR 2 per cent.

While offshore share is expected to decline over the next five years from 30 per cent in 2017 to 24.1 per cent in 2022, it will continue to grow at a CAGR of 3 per cent to reach $140 billion in the UAE in the same period.

Editor's Note: This article was originally published in Gulf News on Sunday July 24th, 2018 http://bit.ly/GulfNewsPrivateGrowth