If you’re a U.S.-based asset manager, you may have become frustrated with the industry’s fragmentation and oversaturation.
Understandably, you might consider global expansion beyond U.S. borders. The world is big, increasingly borderless and full of capital with reduced regulations.
Global expansion should be seamless if you have a decade-long track record, a solid product base, and a minimum of $1B AUM. Foreign markets also respect a successful American track record. The U.S. has prestige, one of the deepest liquidity pools in global markets, and the world’s most liquid capital.
The MENA (Middle East and North Africa) region particularly poses enticing opportunities for international expansion. It’s a booming population with capital ready to be deployed. With 6% of the world’s population and a GDP of $3.6 trillion, representing 4.3% of the global total, you’ll enter a market yet to scratch the surface of its potential.
For asset managers considering Middle East expansion, Saudi Arabia and the United Arab Emirates (UAE) are the clear crown jewels.
Why Saudi Arabia and the UAE?
Saudi Arabia and the UAE represent almost half of the MENA region’s GDP. They have wealthy populations and valuable SFOs (Single-Family-Offices), MFOs (Multi-Family-Offices), venture capitalists and private equity.
Moreover, there is no domestic bias. Saudis and Emiratis understand what a credible American asset manager can offer.
If researching global expansion, the accommodating business climates and reduced regulations in these markets should intrigue you.
Favorable Business Climate
Saudi Arabia
Saudi Arabia is the MENA region’s largest economy and represents one-fifth of its GDP. With long-term economic ties with the West, Saudis welcome American asset managers with the AUM and track record with open arms.
Saudi Arabia’s Vision 2030 initiative is also enticing for asset managers considering global expansion. With Vision 2030’s objective to diversify the Saudi economy, getting licensed and selling mutual funds in Saudi Arabia has never been easier.
Institutional investors will likely look to invest in U.S. funds that consistently outperform the S&P 500.
A Wealthy Population Tailor-Made for Asset Managers
Saudi Arabia hosts the most millionaires and billionaires in the Middle East, translating to many family offices, VCs and Private Equity firms seeking to invest with U.S. asset managers.
High net worth family offices are highly concentrated. The top 80% control the majority of capital, and the Saudi Royal Family oversees the largest family office. Many others congregate in Jeddah and Riyadh.
The Saudi VC and Private Equity spaces are also booming. As VC deals in the U.S. slow, Saudi deals increased 244% during H1 2022 and reached a record high of $584M.
UAE
A US asset manager looking to expand to the UAE will find the abundance of capital and business-friendly regulations enticing.
The UAE’s GDP has skyrocketed 247x since 1971 due to government initiatives and investor-friendly policies.
Out of 190 countries in the ‘Ease of Doing Business’ index, the UAE ranked
- 16th in ease of doing business
- 1st in business efficiency
- 2nd in government efficiency
- 7th in economic performance
It is no wonder that over 1,500 American companies choose the UAE as their Middle Eastern hub.
A Flourishing High-Net-Worth Community
U.S. asset managers looking to get licensed and sell their funds in the UAE to SFOs, MFOs, and other institutional investors, will find many opportunities with Dubai’s active investment community and fast growingg high-net-worth population.
The number of millionaires moving to Dubai surpassed New York and Los Angeles in 2019. With this figure rising another 18% in H1 2022, Dubai is now on track to rank as one of the world’s top 20 wealthiest destinations by 2030.
Abu Dhabi and Sharjah also saw their high-net-worth population jump by 16% and 20%, respectively.
This influx of wealth has created a robust family office, VC and private equity market. The UAE represents 55% of invested private equity in the MENA region, while Magnitt’s ranked UAE first regionally for venture capital investments.
Many UAE private equity funds are family-owned and have a strong track record. Family offices also congregate in Dubai and aim to diversify investments into U.S. funds through a U.S. asset manager with a consistent track record.
Reduced Regulatory Barriers
Saudi Arabia
Saudi Arabia’s Vision 2030 has significantly opened the country to foreign businesses. It revamped investment laws, eased business regulations, increased international openness and competition and relaxed the regulatory and business barriers to entry.
For U.S. asset managers seeking to sell and market funds to Saudi SFOs, MFOs, and other investors, these reforms mean:
- Fewer bureaucratic hurdles to securing a license.
- Reduced regulatory costs.
- Compliance requirements that are hospitable for U.S. or foreign asset managers.
The Saudi government has also opened many businesses to 100% foreign ownership without minimum capital requirements. Moreover, business licenses can receive approval in less than 24 hours.
There is also no sales tax and “no tax payable on the salaries of foreign employees.”
UAE
The UAE has business-friendly regulations for international expansion. There’s no personal income tax, no capital gains taxes, and more than 135 double tax agreements.
Government initiatives like the “Golden Visa” program also encourage skilled foreign workers to come to the UAE.
Dubai has been the model emirate for global business expansion. Besides attractive tax laws and lax regulations, Dubai also has free zones where foreign businesses can operate free of income tax while retaining total company ownership.
As Abu Dhabi, Sharjah, Ajman, Umm al-Quwain, and Fujairah attempt to emulate Dubai’s success, they have also witnessed an influx of foreign business expansion.
What does this mean for U.S. asset managers?
Middle East expansion poses attractive opportunities to bolster your AUM. However, cultural and marketing nuances are essential in selling and distributing funds in relationship-based markets like Saudi Arabia and the UAE. At Black Swan Diagnostics, we have the resources, expertise and relationships to assist with this.
You can expand in these markets either on an offshore or onshore basis. Offshore expansion means you fulfill a country’s license and compliance requirements without having a physical office, resources, overhead or staffing on the ground. Onshore means you go through the regulatory and compliance hurdles while maintaining a physical office, staff and overhead.
With reduced regulatory barriers in Saudi Arabia and the UAE, regulators increasingly support international commerce by creating business-friendly markets.
If you’re interested in learning more about expanding into the Middle East and how we can help, let’s chat. Reach out to us at Black Swan Diagnostics today, and let’s create a game plan.