Insurance sector to spur growth
Manama, October 5, 2010
The introduction of more liquid products and development of the insurance sector will help drive growth of the asset management industry in Saudi Arabia, an executive at investment firm Al Rajhi Capital said.
Gaurav Shah, head of asset management and chief executive-designate at Al-Rajhi Capital said the asset management space in the kingdom has been hit hard in the last couple of years after growing at a rate of 25 to 30 per cent between 2005 and 2008.
Al-Rajhi Capital is the investment banking arm of Al-Rajhi Bank, the kingdom’s
biggest lender by market value.
The industry has also been crippled by high concentration within capital markets and a lack of viable alternative investment options, said Shah whose firm manages about SR13 billion ($3.5 billion) in the region.
“You have the top 10 companies accounting for 60 to 65 per cent of the market
capitalisation,” Shah said.
“As a result, a lot of investors prefer to invest directly in these companies instead
of going through a managed investment platform supported by fundamental research from the asset management industry.”
Investors are also limited by the range of alternatives available to play the market. Only options available currently are equity investments, direct real estate and low-yielding money market instruments. This means investors in the region have fewer options than in more developed and even some emerging markets with flourishing fixed-income markets.
“Investment options for the retail market are still relatively limited,” Shah said. Yet, Saudi Arabia is the largest market in the region and global banks and fund managers have set up shop in the kingdom looking at ways to tap opportunities on the Gulf’s largest and best performing market in 2009.-TradeArabia News Service