GCC asset managers to remain ‘comparatively resilient’ amid Covid-19 crisis: Moody’s
June 08 2020 05:36 PM
Moody's Investors Service
Moody's Investors Service

GCC asset managers will remain “comparatively resilient” thanks to their “track record of strong performance, as well as their affluent client base and strong customer relationships”, Moody’s Investor Service has said in a report.

“These factors are reflected in positive fund inflows for the sector since the start of the pandemic for established players. Larger managers with a diverse mix of assets and strong digital platforms are better positioned than smaller players, some of which may over time be forced to consolidate,” Moody’s noted.

“Asset managers in the Gulf Cooperation Council (GCC) countries are under pressure from the coronavirus crisis and an accompanying drop in oil prices, which has weighed on their assets under management (AUM),” Moody’s said.

GCC fund managers' AUM have fallen since the start of the coronavirus outbreak in mid-February, reflecting lower market valuations. However, the fund inflows have remained positive for established players, contrasting with net outflows for some western counterparts.

The GCC sector's resilient inflows partly reflect its exceptionally strong performance in 2019, as well as its bespoke mandates from a range of affluent clients, including high net worth individuals, family offices, sovereign wealth funds (SWFs) and other government institutions which generally have higher risk tolerance and longer investment horizon.

According to Moody’s Investor Service, the sector has reported a shift towards lower risk assets. The hardest hit segments of the market will be equities and multimarket funds, as investors become more risk averse.

“Furthermore, we expect some diversification away from the region to reduce risk, currently the sector is highly concentrated within the region. Additionally, we also expect demand for alternative investments (such as real estate) to continue to be a key feature of the market,” the report said.

“Low oil prices will put asset managers' revenues under strain,” Moody’s said.

The coronavirus pandemic has depressed global oil demand, triggering a sharp decline in oil prices since the end of January. This will hold back the region's economic growth, and will also weigh on its asset managers, whose customers rely on oil for the bulk of their revenues.

Larger asset managers are best equipped to absorb the resulting pressures, which may over time trigger some consolidation between smaller players, it said.

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