It’s About Reaching the US$ Trillion Mark

Ebrahim K Ebrahim

Pension Researcher & Chairman of the Annual MENA Pensions Conference

Answering a good question on my article for Asset Managers. Stuart Carmichael, Head of Proposition at Synaptic Software Limited, from the UK wrote commenting on that article:

Good article Ebrahim. How does the Middle East stack up against the BRIC markets when Asset Managers are considering where to focus their efforts?

Thanks my friend; quite thoughtful. I believe that asset management and asset allocation decisions aren’t simply made on the basis of one region against another, or better or larger than others, but on the specific intrinsic underlying value of each region as an investment product in its own right. Of course, it goes without saying that this process entails the essential due diligence on fundamentals, quantitative and other macro-economic aspects. Moreover, in today’s mostly risk-based portfolio modelling, the name of the game is diversification. Hence, probably the more accurate question asset managers ask themselves is: how much and in which asset class I need to invest in region X vs. region Y, rather than in which region I put (all) my investments.

That said, the question goes beyond the key tenet of the article – as I’m humbly a savings and pension staff, not yet and will most probably never be an asset manager. The article is about the unique and tremendous power of pension to create unprecedented sizes of assets globally. Pensions roughly represent 35% of global financial assets today. In the West, where pension is structured into multiple regulated vehicles (the government pillar, the workplace pillar and personal retirement savings) these assets reached the US$ trillion mark long ago. And we’re saying, according to actuarial estimations, our region has the potential to create US$1.9 trillion Assets Under Management if we follow the savings trend prevailing in 16 countries studies by Towers Watson.