Middle East holds the highest share of private wealth offshore

Dubai: Globally, the Middle East and Africa (MEA) region has the largest share of private wealth booked offshore, thanks to the political and economic tensions in the region, according to the Global Wealth Report 2015 by BCG .

The report showed that while the MEA region held 31 per cent wealth offshore, Latin America and Eastern Europe have 28 per cent and 19 per cent respectively.

Globally, according to the report, private wealth booked in offshore centres grew by 7 per cent in 2014 compared to 12 per cent growth for onshore wealth. Looking ahead, the offshore wealth is projected to grow at a compounded annual growth rate of 5 per cent through 2019 to reach an estimated $12 trillion (Dh44 trillion), compared with a projected CAGR for onshore wealth of 6 per cent.

While economic and political instability is a key factor in driving assets offshore, shortage of onshore asset classes and management skills are driving demand for offshore domiciles.

In 2014, Caribbean and Panama remained the preferred destinations for wealth originating from North America with 54 per cent of offshore wealth placed there.

“Proximity to the offshore centres was a common factor in the selection of centres to book assets. Ease of travel and access to these centres were seen as a decisive factor in the selection of asset booking centres,” said Markus Massi, Partner and Managing Director at BCG Middle East.

While most wealth originating in both Western and Eastern Europe were booked in key European booking centers close to the region such as Switzerland, Channel Islands, UK, Dublin and Luxembourg, for wealth originating in Asia Pacific region (ex Japan) Singapore attracted the most with 31 per cent share and Hong Kong 15 per cent.

For Middle East and Africa region, Switzerland was the top destination attracting 37 per cent of offshore assets booked from the region followed by UK 22 per cent and Dubai 12 per cent.

Projected CAGR

Private wealth in the MEA region increased by more than 9 percent to reach nearly $6 trillion in 2014. With a projected CAGR of 9 percent, the region’s private wealth will rise to an estimated $9 trillion in 2019.

While 2014 continued to see strong double-digit equity performance in the MEA, the year was also positive for onshore bonds with double-digit performance in the region.

In addition, the MEA region had the second-highest proportion of newly created wealth (44 percent), with the balance of the increase in wealth attributable to the market performance of existing assets.

“Solid savings rates and continued GDP rises in oil-rich countries contributed to the newly created wealth, while existing asset performance was solid despite the region’s volatile developments,” said Massi. “Overall, across the region, the drivers of wealth growth will have significant implications for wealth managers in the years ahead.”

The BCG report says that despite the intense scrutiny being placed on offshore domiciles, there is still potential for profits and future growth for offshore players that stay ahead of the curve strategically. “Clients are still willing to pay a premium for benefits such as political and financial stability, regional diversification, high-quality service, discretion, and broad expertise across products and asset classes. Top offshore performers are transforming their businesses to make them viable for the future,” stated Anna Zakrzewski, a BCG partner and a coauthor of the report.

By Babu Das Augustine Banking Editor

Gulf News 2015. All rights reserved.

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