November 23, 2022

Arabian Fund Market Summary – Year-To-Date Q3 2022

by Detlef Glow.

The fund industry in the Arabian markets (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) faced overall estimated net outflows of $14.2 bn over the course of the first nine months of 2022. These inflows occurred in a negative and volatile market environment as central banks around the globe were fighting the increasing inflation rates with increasing interest rates and quantitative tightening measures. At the same time, economies around the globe faced further shortages within supply chains as the COVID-19 pandemic is further looming while prices for energy are further increasing, which led to fears that companies may not hit the expected growth and profit targets. Within such a market environment it is not surprising that investors reducing risk positions within their portfolio.

 

Assets Under Management in the Arabian Fund Markets

Within this environment, the overall assets under management in the Arabian fund markets decreased from $56.0 bn at the end of 2021 to $41.5 bn as of September 30, 2021. This decrease was driven by estimated overall net outflows (-$14.2 bn), while the performance of the underlying markets added (-$0.3 bn) to the overall decrease in assets under management.

Graph 1: Assets Under Management in the Fund Industry of the Arabian Markets (US Dollar Billions)

Arabian Fund Market Review - YTD Q3 2022

Source: Refinitiv Lipper

 

Assets Under Management by Fund Market

The assets under management in the Arabian fund markets are highly concentrated since the largest fund market, Saudi Arabia, accounts for $38.3 bn, or 92.45%, of the overall assets under management. Meanwhile, Kuwait accounts for $2.2 bn, or 5.23%, of the overall assets under management, and the United Arab Emirates accounts for $0.4 bn, or 1.00%, of the overall assets under management. The other three countries—Qatar ($0.4 bn), Bahrain ($0.1 bn), and Oman ($0.03 bn)—amount to 1.32% of the overall assets under management in the Arabian fund market.

Graph 2: Market Share by Fund Market (September 30, 2022)

Source: Refinitiv Lipper

 

Assets Under Management by Asset Type

Money market funds ($31.7 bn) were the asset type with the highest assets under management at the end of September 2022, followed by equity funds ($7.5 bn), mixed-assets funds ($1.2 bn), bond funds ($0.4 bn), real estate funds ($0.3 bn), “other” funds ($0.2 bn), alternatives funds ($0.04 bn), and commodities funds ($0.001 bn).

Graph 3: Market Share by Asset Type (September 30, 2022)

Source: Refinitiv Lipper

 

Assets Under Management by Promoter

Riyad Capital ($10.0 bn) was the largest fund promoter in the Arabian fund markets as of September 30, 2022, ahead of National Commercial Bank ($8.0 bn), Al Rajhi ($6.5 bn), Samba Capital ($2.2 bn), and HSBC ($1.8 bn).

Graph 4: Ten Largest Promoters by Assets Under Management, September 30, 2021 (US Dollar Billions)

Arabian Fund Market Review - YTD Q3 2022

Source: Refinitiv Lipper

 

Arabian Fund Flow Trends January 1 – September 30, 2022

Generally speaking, the year 2022 has been a tough period so far, which is reflected in the outflows from mutual funds over the course of the first nine months of 2022. As the fund industry globally is facing estimated net outflows, it is no surprise that the asset managers in the Arabian fund management industry were also hit by estimated net outflows (-$14.2 bn).

 

Fund Flows by Asset Type

A detailed look at the estimated net flows by asset type shows that real estate funds (+$0.02 bn) was the only asset type which enjoyed estimated net inflows for the year so far. On the other side of the table, money market funds (-$13.5 bn) faced the highest outflows overall, bettered by equity funds (-$0.5 bn), bond funds (-$0.1 bn), mixed-assets funds (-$0.1 bn), “other” funds (-$0.004 bn), alternatives funds (-$0.002 bn), and commodities funds (-$0.0004 bn).

Graph 5: Estimated Net Sales by Asset Type, January 1 – September 30, 2022 (US Dollar Billions)

Arabian Fund Market Review - YTD Q3 2022

Source: Refinitiv Lipper

 

Fund Flows by Fund Market

The fund flows in the Arabian fund markets are as highly concentrated as the assets under management. Therefore, it is not surprising that the largest fund market, Saudi Arabia, accounts for $13.7 bn of the overall outflows (+$14.2 bn). It was followed by Kuwait (-$0.2 bn), the United Arab Emirates (-$0.03 bn), Oman (-$0.003 bn), and Bahrain (-$0.001 bn). On the other hand, Qatar (+$0.04 bn) was the only fund domicile which enjoyed inflows year to date.

Graph 6: Fund Flows by Fund Market, January 1 – September 30, 2022 (US Dollar Billions)

Source: Refinitiv Lipper

 

Fund Flows by Sectors

Real Estate Other (+$0.02 bn) was the best-selling sector overall for the first nine months of 2022, followed by Mixed-Assets Other Aggressive (+$0.01 bn) and Equity Global (+$0.01 bn).

Graph 7: The 10 Best- and Worst-Selling Sectors January 1 – September 30, 2022 (US Dollar Billions)

Source: Refinitiv Lipper

At the other end of the spectrum, Money Market SAR (-$12.9 bn) suffered the highest estimated net outflows overall, bettered by Money Market USD (-$0.4 bn), Money Market Other (-$0.1 bn), Equity Saudi Arabia (-$0.1 bn), and Bond Other (-$0.1 bn).

As for the current market environment, one might be surprised by the heavy outflows from money market funds. Given the fact that inflation and interest rates are increasing at the same time, we observed that investors around the globe are reducing their positions in money market products. Therefore, this move can be seen as an asset allocation decision to protect the portfolios from the impact of rising inflation rates.

 

Fund Flows by Promoter

Al Rajhi, with net sales of $0.4 bn, was the best-selling fund promoter for 2022 so far, ahead of Saudi Fransi (+$0.1 bn), Jadwa Investment (+$0.1 bn), GIB Capital (+$0.1 bn), and Itqan Capital (+$0.02 bn).

Graph 8: Ten Best Selling Promoters, January 1 – September 30, 2022 (US Dollar Billions)

Arabian Fund Market Review - YTD Q3 2022

Source: Refinitiv Lipper

 

This article is for information purposes only and does not constitute any investment advice.

 

The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

 

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