Saudi Arabia’s

Asset Management
Amid COVID-19

Prudently optimistic in 2021, asset

management industry remain buoyant

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Foreword
According to the data given in the article, 2020 has been a year of growth
in terms of revenue, profitability, and assets under management (AUM).

As per the statistics from the Capital Market Authority (CMA), total
assets under management (AUMs) held by licenced asset managers
(public and private funds, and private portfolios) in Saudi Arabia grew
11%, or SAR 64.5 billion, quarter-on-quarter (QoQ), to SAR 676.2 billion
in Q1 2021.

Based on analysis of current state of asset management industry, it is

expected to see increased competition in the market and investors
seeking more value from their fund managers, firms will need to
differentiate themselves through demonstrating cross fertilization of
investment ideas to generate alpha and developing digital enablers to
provide bespoke customer experience.

Saudi asset managers should investigate and analyse other potentially

lucrative markets for their customers. While the UK, US, and China may
not now provide significant returns on investment, areas such as Greece,
Romania, Eastern Europe, Poland, and the Benelux Union might be viable
options for Saudi investors.
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Robust Financial Position
Strengthening Financial Position Amid COVID-19 Number of funds as at Q3 2020*
2020 has been a growth year in terms of revenue, profitability, and assets under
management (AUM) evident from asset management firms information Total Public Funds
presented in the article

It is important to highlight that even 2019 was a strong financial year when 255
firms recorded growth of 33% in their cumulative net income, largely on account Total Public Funds Q4 2019 were 253
of 13% growth in asset management fees.

This trend of growing brokerage income, along with asset management fees on
equity based funds, continued in 2020. The growth can be attributed to both Total Private Funds
strong financial performance of invested funds (i.e. net assets values) and an
increase in assets under management.
403
The total number of private funds has increased by 14% in third quarter of 2020 Total Private Funds Q4 2019 were 354
from Q4 2019, while the total public funds have reached to 255 in Q3 2020. This
growth is largely testament to the inclusion of Saudi equities in global indices
such as MSCI and FTSE.

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Assets Under Management (Trend)

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Assets Under Management (Trend)
Trend of Assets Under Management Over The Years
The total assets under management (AUMs) held by licensed asset managers (public and private funds, and private portfolios) in Saudi Arabia
increased 11%, or SAR 64.5 billion, quarter-on-quarter (QoQ) to SAR 676.2 billion in Q1 2021, data from the Capital Market Authority (CMA)
showed.
Assets Under Management (SAR bln)
700

600

500

400

300

200

100

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020 2021

Source: CMA
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Companies with Most Increase &
Decline in AUMs

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Companies with Most Increase/
Decline in AUMs
Companies with Most Increase in AUMs (SR in Million) Remarks:
Company Q4 2020 Q1 2021 Variation Variation (%) KSA Capital markets are dominated by the
larger players. In Asset management, the top
Darfin Capital 17.61 30.99 +13.38 +76 %
10 firms with the largest assets under
Morgan Stanley Saudi Arabia 2276.33 3778.73 +1502.4 +66 % management (AUM) had a total market
Arbah Capital 563.44 859.13 +295.69 +52 % share of over 80%.
Areeb Capital 163.97 163.97 +69.23 +42 %
Falcom Financial Services 2513.07 3130.44 +617.37 +25 % Darfin Capital reported the highest increase
in AUM of 76% to SAR 30.99 million in Q1
2021, followed by Morgan Stanley Saudi
Companies with Most Decline in AUMs (SR in Million) Arabia with a rise of 66%.
Company Q4 2020 Q1 2021 Variation Variation (%)
Meanwhile, UBS Saudi Arabia reported the
UBS Saudi Arabia 11.35 0 (11.35) (100 %)
biggest drop in AUMs at 100% in Q1 2021. It
SEDCO Capital 5958.19 3942.5 (2015.69) (34 %) was followed by SEDCO Capital with a drop
SKFH 1565.80 1306.75 (259.05) (17 %) of 34%.
KASB Capital 1220.57 1011.99 (208.58) (17 %)
Itqan Capital 1482.16 1296.44 (185.72) (13 %)

Source: CMA
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Resiliency to Continue
Strengthening Financial Position Amid COVID-19
With regards to industry outlook, Covid-19 crisis made us aware of the impact of unexpected
events, and though it cannot be predicted how the situation will evolve, it is likely to see the
improvement in our handling of the situation and our resiliency to such events.

Based on analysis of current state of asset management industry, it is expected to see

increased competition in the market and investors seeking more value from their fund
managers, firms will need to differentiate themselves through demonstrating cross fertilization
of investment ideas to generate alpha and developing digital enablers to provide bespoke
customer experience.

Retail investors' risk appetite has already been reduced, and they are likely to pursue a
diversification agenda as part of their ongoing risk management. However, the Saudi Arabian
fund managers' Ultra-high-net-worth individuals customer base will continue to be critical in
sustaining steady AUMs.

Also, there is an uptick in the deployment of necessary capital to start-ups and entrepreneurs
through venture capital or private equity type investments arising from imminent privatizations
and the presence of distressed assets as a result of the pandemic.

Fund managers are expected to provide a diverse investment suite to potential investors, in
accordance with the worldwide trend, as risk/reward appetite changes in the market and fund
managers adjust their investment strategies appropriately.

There is a global uptake in environment, social and governance (ESG) investments and only a
matter of time before ESG becomes a top of the agenda item for both investors and fund
managers in Saudi Arabia.
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Investment Outlook
Investment outlook
Changing world dynamics now require the Saudi asset managers to examine and analyze other
potentially lucrative markets for their customers.

The COVID-19 situation is testing the efficacy of decision-making and execution strategies of
asset managers in the Kingdom, along with their ability to proactively manage client’s needs
and expectation. Moreover, fund managers may also need to explore the venture capital /
private equity investment opportunities that might secure some higher returns for the investors
through the new possibilities in the post covid 19 world such as technology, healthcare ,
education etc.

Real estate will remain the prime form of investment by the asset/ fund managers as the covid
19 restrictions wave off and the people will get vaccinated so will the economy revive resulting
in the resumption of the construction work . Thus, providing the capital gains and stable
income sources for the investors and the asset mangers.

Moreover, OPEC has gradually added back production that it aggressively sidelined during last
year's oil crash. As economies reopen, manufacturing picks up and people start to travel again,
demand for oil is outpacing supply and sending prices higher. Therefore, the economic recovery
of KSA will have trickle down impact on the Assets under Management and their overall
performance.

The KSA government continued efforts and support shall ensure a conducive business
ecosystem for the investors and the investee.

Foreign Investment in the current times when the valuations are slightly hit by the covid 19
impact is expected to increase which makes the investment outlook lucrative.
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