In general, the overall investment climate for Saudi Arabia is shifting in light of Vision 2030’s economic developmental plans. Among the notable outcomes of this shift, the kingdom witnessed a very high growth rate in the asset management industry.
This sector has a broad conceptualization that ranges from managing investment funds to mutual funds and many others and has received considerable interest from domestic and foreign investors.
Since Saudi Arabia is gradually developing into an international financial center, analyzing the asset management companies in Saudi Arabia and identifying market leaders is critical for investors and other market participants.
The Evolution of Asset Management in Saudi Arabia
The Saudi experience should not be viewed as a one-day evolution but rather as the result of the gradual development of a package of measures for developing the country’s non-oil asset management.
Earlier the economy of the Kingdom was based on the revenue generated from the export of oil and hence was erratic because it used to depend upon international oil prices.
More specifically, to stabilize and experience sustainable growth in the Kingdom of Saudi Arabia’s economy and not entirely rely on the oil sector, the government offered Vision 2030, a directional plan for the alteration of the Saudi economic model.
It, also Saudi Arabia’s asset management companies will have much more influence in determining direction and direction of the industry, therefore determining the fate of the nation’s financial industry.
It has resulted in increased formation of asset management firms in Saudi Arabia and offered the investors from Saudi Arabia as well as the international investors avenues through which they could invest.
Investment Funds in Saudi Arabia Financial System
This article assesses the implications of investment fund within the context of Saudi Arabian asset management. These funds enable the investors to gain a diversified fund while the professional fund managers invest in all types of assets.
Superior returns, together with risk management, have recently been embraced in Saudi Arabia due to investment funds.
Open-ended investment companies are among the preferred investor instruments in Saudi Arabia because they allow the aggregation of funds and investments in a range of securities.
These are funds which are channeled by qualified fund managers, which assists the investor in reaping from the expert advice.
Thus, there is a certain distinction between types of investment funds which is available in Saudi Arabia, for instance mutual investment funds, ETF, REIT.
Mutual Funds:
The Saudi Arabian investors use different investment tools with the highest one being the mutual funds. These funds enable investors to combine their capital to invest in multiple stocks, bonds, and other securities.
Professional management of these funds helps investors garner returns after embracing sound decisions and risk management.
Therefore, the high accessibility of mutual funds is one of the notable advantages of mutual funds in KSA. Anyone can buy them, including small investors, making them suitable for retail investors.
In addition, investment in mutual funds offers liquidity, and any securities may be sold or purchased at the fund’s Net Asset Value at the the end of each trading/working day.
The Saudi mutual fund market has expanded considerably over the last few years due to the enhancement of the investors’ consciousness and the appearance of Shariah-compliant mutual funds. These are Islamic-based funds and are a favorite among most local investors.
The Emergence of Exchange-Traded Funds (ETFs)
ETFs, such as exchange-traded funds, have also become popular in Saudi Arabia. These funds also operate based on other related and combined pools of money the investors intending to make a diversified portfolio.
However, unlike mutual funds, ETFs can be bought and sold from stock exchanges, giving real-time price information to their investors.
The ETFs within the Saudi Arabian market are offered in multiple asset classes, such as equities, fixed income, and commodities. This means they can inexpensively give investors access to specific markets and sectors.
Real Estate Investment Trusts (REITs): A Growing Asset Class
These investments produce rental income for the investors and at the same time, allow chances to gain a capital appreciation.
There is clear political backing for the development of REITs in Saudi Arabia, where new legislation has been approved for the formation of such funds, and existing REITs have been urged to list on the Saudi Stock Exchange known as Tadawul.
This has meant that more divers have been keen to look at real estate as one of the asset classes, thus developing the asset management industry in the Kingdom.
Conclusion
Asset management as a concept in Saudi Arabia may well be classified as one of the most important events when it comes to the process of diversification of the kingdom’s economy and the overall innovative financial advancement.
It can be argued that the emergence of international Asset management companies in Saudi Arabia marked one of the directions toward economic diversification and innovative financial growth path in the Kingdom.
Likewise, Saudi Arabia’s asset management companies will also deposit a substantial contribution in determining the future and direction of the industry and hence the supremacy of the nation’s financial industry.
It can be concluded that significant potential for developing Saudi Arabia’s asset management industry is expected in the coming years if the targeted investment fund and the long-term growth orientation of the managed assets are appropriately taken.
