Saudi asset management grows through war, pushes toward USD 400 bn - Fitch

One corner of Saudi finance is still growing through the war, and so is foreign appetite for it. The Kingdom’s Industry assets under management (AUM), the Gulf’s largest, expanded 20% y-o-y to about USD 370 bn in the first half and total AUM should surpass USD 400 bn in 2027, Fitch Ratings said, calling it resilient despite the volatility battering much else. The industry now equals 27% of GDP, up from 23% a year earlier.

“Growth is likely to continue, supported by stronger investor demand, regulatory progress, and rising foreign participation,” said Fitch Global Head of Islamic Finance Bashar Al Natoor. He flagged geopolitics, oil prices, and interest rates as the main risks, but said a strong domestic investor base cushions the sector.

Private capital is doing the heavy lifting: Private funds make up 55% of assets after growing 31%, led by real estate and equities, with family offices among the biggest backers; discretionary portfolios account for another 27% and public funds 18%, the latter up 19%. On a narrower measure, the investment-fund sector alone crossed SAR 1 tn at end-June, with the number of funds up nearly 30% to 2.2k, Arab News reports.

The foreign money is a surprise: International and regional managers lifted their share of industry revenue to 18.5% in 2Q, from 12.5% two years earlier, and foreign ownership of the main market’s freefloat held at 12% through October’s turbulence, helped by Riyadh scrapping direct-access qualification rules in February.

Why it matters: The growth runs against the grain of the bank-liquidity squeeze playing out alongside it, and the two may be connected. As depositors chase yield out of low-cost accounts, some of that money is likely moving into funds, while foreign appetite for Saudi paper helps finance the very deficit squeezing the banks. Regulators are pulling liquidity onshore, too: the Capital Market Authority (CMA) capped public money-market funds’ overseas holdings at 5% of their net asset value and, in October, proposed tighter fund-disclosure rules.

The ballast is Islamic finance and credit quality. Almost all Tadawul mutual funds are shariah-compliant, and Fitch’s Al Natoor calls Islamic finance “a structural strength of the Saudi market, not a niche”; nearly all Saudi sukuk, and 96% of the Tadawul entities Fitch rates, are investment grade.

What’s next: Watch whether the foreign inflows into debt and funds hold if the war drags on, and whether the path to USD 400 bn survives the oil-price and rate risks Fitch flags.