Investmentfunds are alsostructureddifferently in the Gulf. All investmentfundfunctions stem from one institution. Investors in other areas of the world tend to bewary of thisfact, according to Mahmood. “There’s a lack of appropriate benchmarks. Corporategovernance, transparency, and disclosureneeds to advance,” hesaid.
And yes, the global financialcrisisaffected the riskappetites of investors in the Gulf and beyond. Total net assets of mutualfundsworldwidenearlydoubledbetween 2000 ($11.9 trillion) and 2006 ($21.8 trillion). A yearlater, in 2007, worldwideassetspeakedat $26.2 trillion. In 2008 the value of thoseassetsdropped to $18.9 trillion. “People werescared,” Mahmoodsaid. “Equity continues to seeredemptionsintofixedincome. The lossis acute right now. Clearly the institutionalinvestors are playingwith the marketinstead of againstitwith bond funds.”
The stock marketcapitalizations as a percentage of nominal G.D.P.s are moderateacross the G.C.C. SaudiArabia’smarket cap is 53 percent of its G.D.P., for example, whileQatar’s and Dubai’smarket caps are about 75 percent of their respective G.D.P.s. Morgan Stanley estimatesthat the G.C.C. fund management industrycurrently stands at $115 billion. SaudiArabia’s $55 billion in assetsaccounts for 48 percent of that total, whichdoesn’tincludesovereignwealthfunds.
It’s a fairlyunderdevelopedmarket. Assetsunder management in SaudiArabia, for example, account for 17 percent of the country’smarket cap, while the U.A.E.’sassetsunder management are just 13 percent of itsmarket cap. Bahrain’s A.U.M. are 48 percent of its stock market’scapitalization, makingit by far the regional leader.
Viewedanotherway, the vastpotential for fundindustrygrowthbecomesclear. Assetsunder management in SaudiArabiaaccount for just 22 percent of its $250 billion in bankdeposits. In the U.A.E., A.U.M. are just 5 percent of the country’snearly $300 billion in bankdeposits.
Indeed, the G.C.C. has one of the world’slowestpenetration rates of mutualfunds. In America, mutualfundassetsaccount for 69 percent of the country’s G.D.P. In the United Kingdom, suchassetsrepresent 25 percent of the G.D.P. But in SaudiArabia and Qatar, mutualfundsmake up a respective 5 percent and 4 percent of those countries’ G.D.P.s.
Growth in SaudiArabia’sinvestmentfundassets has been strong: Over the past 17 years, the country’sfundassets have posted a compound annualgrowth rate of 12.33 percent.
How to sustaindouble-digitgrowth? Equity and bond markets as a percentage of G.D.P. are on the rise in the Gulf countries. Plus, a new crop of eagerfund managers are marketing to investorsbased on performance. Peter Lynch wouldbeproud.

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