Dubai: Private wealth in the UAE is projected to post a compound annual growth rate of 14.1 per cent to reach almost $1 trillion in 2020; over the next five years, private wealth held by ultra-high-net-worth households in the Emirates is also expected to increase by a staggering 20 percent, according to a new report by The Boston Consulting Group (BCG).
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 report Global Wealth 2016: Navigating the New Client Landscape released today.
Based on 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 percent in cash and deposits, and 4.8 percent in bonds.
BCG study outlines the evolution of private wealth from both a global and regional perspective, addresses key industry trends, and explores evolving client needs—particularly those of underserved, nontraditional segments such as female investors and millennials.
“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 capitalize on the full potential of the market.”
According to the report, 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. However, by 2020, private wealth held by this specific segment is expected to increase by a healthy 20 per cent.
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 percent over the next five years.
Interestingly, in the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed the highest growth in 2015. Private wealth in that segment soared by an impressive 13.6 per cent in 2015 and with a projected CAGR of 16.5 per cent over the next five years, this segment will continue to undergo significant growth.
The total number of millionaire households (those with more than $1 million in net investable assets) in the UAE went up by 8.5 percent in 2015. Looking ahead, it is set to grow by another 7.9 per cent by 2020.