$1.6 trillion offshore wealth from MEA in Switzerland 

111,000 HNWIs with up to $5 million private wealth each in Saudi Arabia, UAE & Kuwait 

Asset managers sees surge in flight of capital for secure returns

$0.5 trillion offshore wealth to come from MEA by 2020

Geneva, June 23, 2014: The ‘geo-political instability’ in the Middle East, coupled with expanding private wealth in several oil-rich countries in the region, is spurring rich Arab investors to turn to Switzerland for ‘secure and long-term’ wealth management solutions, according to a survey of prospective clients done by a leading  Swiss-based asset manager specializing in the Middle Eastern region.

Swiss-based asset managers, WT Capital Management S.A (www.wt-cm.com), have seen a significant surge in queries and readiness from rich Middle Eastern families to transfer assets out of the region in a big way. A trend is certainly emerging about the potential of significant volume of capital in the coming time from the region where there is intrinsic uncertainty.

Abdulla Mahdy of WT Capital Management S.A, said: “We have seen an increase in demand for wealth management solutions from Middle East in general and GCC in particular. There is likely to be a flight of capital to a safer environment like Switzerland. We have had a surge in requests for custodian services and tailored structured products and expect a reasonable growth this year. We believe competitive pricing, enhanced return and a wider range of investments products give Swiss banking a significant edge over other regions.”

He said independent asset managers will continue to thrive in the Middle Eastern markets as the investors considers them not being biased or bound to any single financial institution which enables them to coherently diversify asset allocation, reduce transactional and custody costs to increase returns for investors.

Also, the banking confidentiality, political stability and a liberal economic system have made Switzerland a premier offshore haven for Middle Eastern money.  In 2013, Switzerland remained the leading offshore booking center with $2.3 trillion in assets, representing 26 percent of global offshore assets.  The world’s largest cross-border financial centre has seen assets from the Middle East region climbing each passing year due to developments in Egypt, Iraq, Tunisia, Libya, Lebanon and Syria among other countries.

Global private financial wealth grew by 14.6 percent in 2013 to reach a total of $152.0 trillion, according to a latest study by Boston Consulting Group (BCG), with double-digit growth seen in the Middle East and Africa (MEA).

Globally, the growth of private wealth was driven primarily by returns on existing assets. The amount of wealth held in equities grew by 28.0 percent, with increases in bonds (4.1 percent) and cash and deposits (8.8 percent) lagging behind considerably.

As a result, asset allocation shifted significantly toward a higher share of equities. Global private wealth is projected to post a compound annual growth rate (CAGR) of 5.4 percent over the next five years to reach an estimated $198.2 trillion by the end of 2018. Offshore wealth is projected to grow at a solid CAGR of 6.8 percent to reach $12.4 trillion by the end of 2018.

The offshore model will continue to thrive because wealth management clients—particularly in the high-net-worth (HNW) segment, will continue to leverage the differentiated value propositions that offshore centers provide. These include access to innovative products, highly professional investment and client-relationship teams and security.

According to the report, despite remaining tensions following the Arab Spring and the escalation of the conflict in Syria, private wealth in the Middle East and Africa region increased by 11.6 percent to reach $5.2 trillion in 2013.

Key drivers were generally high savings rates and continued strong nominal GDP growth in oil-rich countries, such as Saudi Arabia (13.4 percent), Kuwait (13.6 percent) and the UAE (12.8 percent). The amount of wealth held in equities rose by 30.5 percent across major regional markets, compared with 6.4 percent for bonds and 5.7 percent for cash and deposits.

With a projected CAGR of 6.5 percent, private wealth in the region will reach an estimated $7.2 trillion by 2018.