Middle East pension sector forecast to boom

DubaiA population bulge of young people about to enter the workforce, supported by oil wealth in many countries, is causing the Middle East state pension sector to expand. Respondents to a survey commissioned by Invesco said they expected state pension funds in the Middle East to increase their assets by 19% this year, compared with an average forecast of 16% in last year's survey and 9% the year before that. For the Gulf countries, much of the inflows into these pension pots are likely to come from oil and gas wealth. Respondents estimated that 15% of all new sovereign wealth assets placed in the region are going into pension funds. This trend may see less money flow into the large investment vehicles, such as the Abu Dhabi Investment Authority, as pensions take a bigger share. “You can see the rate of flow into the sovereign funds is declining while that going into the state pension funds is increasing,” says Nick Tolchard, head of Invesco Middle East. “The industry, rather than being very top-heavy with sovereign funds, is gradually rebalancing, with the emergence of a second tier of public pension funds.” The development of the pension sector in the Middle East would be a significant support to the asset management firms in the region, which have so far been sustained by sovereign wealth fund money and family offices. With the exception of Saudi Arabia, the Gulf countries are not home to a large retail investment market, which has meant some asset managers have struggled to develop their businesses. However, the Middle East countries must overcome the challenge of youth unemployment in a region where the state has tended to be the dominant employer. If the state continues to provide jobs for otherwise unemployed youths, it will put pressure on public finances as the population matures. ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.