BlackRock, the world's biggest asset manager, has received a commercial licence to operate in Abu Dhabi, as the UAE capital emerges as a global hotspot for finance.
New York-based BlackRock, which has nearly $11.5 trillion in assets under management, also plans to obtain regulatory authorisation to operate at Abu Dhabi Global Market, the emirate's international financial centre, it said on Monday.
BlackRock will tap into Abu Dhabi's “strategic location, proactive government policies and commitment to sustainable growth” to serve its clients in the UAE and wider region, as well as globally, Charles Hatami, global head of BlackRock's financial and strategic investors group, said.
“Abu Dhabi has rapidly transformed into a global financial centre … [its dynamics] make it an ideal location for capital markets,” Mr Hatami said.
“We look forward to continuing our contribution to the region's economic development and supporting our clients with innovative investment opportunities, particularly in private markets, including artificial intelligence infrastructure and transition focused solutions.”
Operating within ADGM will help BlackRock to “better serve our clients around the world on whose behalf we engage with sovereigns, wealth managers and specialist investment vehicles based in Abu Dhabi, operating in sectors such as infrastructure, renewable energy and technology”, Mr Hatami added.
BlackRock's commencement of its operations in Abu Dhabi comes as the emirate continues to lure global investors to set up their operations as it boosts its financial sector to support economic diversification plans.
In September, Stonepeak, a US-based alternative investment company with $71.2 billion of assets under management, received regulatory approval to set up a base in the ADGM to arrange and advise on investment opportunities in the UAE, the Arab world's second-largest economy.
Also in September, ADGM welcomed its first trillion-dollar asset managers: PGIM, the global asset management business of the New York Stock Exchange-listed Prudential Financial, and Chicago investment firm Nuveen, with both aiming to expand their operations and client bases in the Middle East.
BlackRock is the world's top asset manager, with its AUMs nearly a third bigger than second-placed Vanguard's $8.7 trillion, data from the Sovereign Wealth Fund Institute shows.
The world's top 10 biggest asset managers, nine of which are based in North America, have combined AUMs of more than $37.1 trillion, according to the US-based SWFI.
Its latest move into Abu Dhabi comes after BlackRock revealed plans to establish its regional headquarters in Saudi Arabia – signs that the company is looking to strengthen its operations in the Gulf region and wider Middle East.
Earlier this year, BlackRock appointed Mohammad AlFahim as its head for the UAE, while in August, Ben Powell was reassigned to the region as the BlackRock Investment Institute’s first chief Middle East and Asia-Pacific investment strategist.
Meanwhile, ADGM, established in 2015, is one of the world's fastest-growing financial districts. By the end of June, the number of fund and asset managers operating in ADGM reached 112, managing 141 funds. Some of the major names within the asset management sector that have been granted a financial service providers licence include AXA IM, Eiffel Investment ME, GQG Partners, SS&C Financial Services and Morgan Stanley.
In the first half of this year, the centre registered 231 financial services companies – up 31 per cent from the same period last year – with the total number of companies setting up base in ADGM reaching 2,088 by the end of June.
ADGM also issued 1,271 new licences in the first half of the year, up 20.5 per cent on an annual basis, while the number of financial service providers granted a licence during the period rose 90 per cent to 42, ADGM said last month.
It has also announced new measures to attract more companies to the financial centre. In July, it said it plans to cut commercial registration licence fees for certain categories while raising them for others, as part of its transitional strategy after the financial district expanded to include Reem Island.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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