Despite continued regional uncertainty, private banks and family offices are expanding their presence in the Middle East, with Dubai, Abu Dhabi and Saudi Arabia the leading destinations
From wars to revolutions, the Middle East seldom gets a break. The latest war in Gaza has been front-page news for not just the region’s residents, but the world as a whole. An already-divided US society is becoming increasingly polarised by opposing views of the horrific conflict, leading to heated campus protests representing both sides.
For economists, it has always an area of geopolitical focus. The long-term conflict between Iran and Israel – the key lens of analysis for most – is a sign of the growing importance of “bloc proxy wars”, which have returned for the long-term, according to Samy Chaar, chief economist at Lombard Odier, a Swiss private bank managing $208bn in assets.
“The age of multilateral trade is behind us,” believes Mr Chaar, replaced by a new era of “strategic competition” between rival blocs, manifested in securing of supply chains, as well as military showdowns.
Although the New York Fed’s supply chain pressure index remains at “totally normal levels”, with no deterioration of delivery times, despite Red Sea disruption and predicted oil price hikes yet to bite, there is one key asset which has been impacted by recent escalations between Israel and Iran: gold.
Against this backdrop of continued regional uncertainty, the likes of Lombard Odier are increasingly working with clients who want to move some of their financial affairs to one of the Arab Gulf’s safe havens. While Dubai has been the leader of these hubs since its International Financial Centre (DIFC) took off in 2004, backed by a raft of enabling legislation, Abu Dhabi and Riyadh are also getting in on the action.
“Over the years, the strong regulator – the Dubai Financial Services Authority (DFSA) – alongside the common law jurisdiction, were two very important things that helped attract international financial institutions to come in,” says Amer Malik, Lombard Odier’s head of Middle East International business.
The high-profile Emirate has had a fluctuating economic history, including a major property crisis in 2009 and smaller dip in 2016. Future prospects for property are also challenged increasingly by geopolitics. But Mr Malik says the city state’s authorities have shown they are always able to adapt.
“After each financial crisis or geopolitical crisis or healthcare crisis, the local jurisdiction, the local regulators, the central bank, as well as the DIFC and as well as the Abu Dhabi Global Market (ADGM), they've all come out stronger,” he says.
Currently, there are major concerns around climate change, he admits, with deadly storms leaving vast swathes of the Emirate under water. As he speaks on the phone, Mr Malik describes sightseers on jet skis making their way through the flooded urban environment.
But the “eagerness” to continue to learn and improve is what will set Dubai as well as Abu Dhabi apart from other hubs, he says. “They’re all learning from each other,” states Mr Malik. “Saudi is the next big one but it’s going to require a lot of catching up.”
“For the last several decades, the local leadership has had a very positive attitude in attracting business and wealthy individuals to the UAE,” echoes Selim Elgen, head of Middle East and Africa at Citi Private Bank.
Dubai, he adds, has become “one of the best” tax and legal system regimes. Developing Dubai into a place where people “genuinely want to live and enjoy their productive lives” has also been a boost.
Wealth creation
“What strikes me here and what struck me most when I moved here is the enormous cultural diversity,” says Mr Elgen, describing the 200 plus nationalities living in the city, 80 per cent of whom are expats. “But the one thing they all seem to espouse is a can-do attitude.”
A typical client of Citi has a net worth of $500m in the region. “There is an enormous amount of wealth creation ongoing right now,” says Mr Elgen. “Along with that, is an increasing amount of liquidity generation by our clients.”
Citi aims to “substantially” increase its presence in the region, and in particular develop the United Arab Emirates (UAE) further into a global wealth hub. The bank sees the UAE as one of three key wealth hubs outside of the US, and an area the bank is looking to “double down” and “invest” in.
Data from the World’s Wealthiest Cities Report 2023 revealed that Dubai's population comprises more than 68,500 high net worth individuals, possessing at least $1m in liquid assets, along with 206 ‘centi-millionaires’, individuals with a net worth of at least $100m, and 15 billionaires.
Saudi Arabian mix
The transformation of Saudi Arabia has added another layer to this mix. “Hundreds of billions of dollars are going into infrastructure spending; money is flowing in the region, in healthcare, in education, in tourism, hotels and hospitality,” states Lombard Odier’s Mr Malik, estimating that the country’s construction market is currently valued at $65.6bn. Both Dubai and Saudi are also competing in AI and blockchain technology, enticing family offices to set up shop in the region.
More than $5.2tn is estimated to pass between generations within the next 30 years, according to UBS. Unlike the US, most of Europe and Asia, the UAE is seeing the first-generation transfer money to the second. Mr Malik believes there is an “immense opportunity” for intergenerational wealth in the region, set to play out over the next 20 years, with emphasis on a “strong governance framework” and increasing awareness of sustainability. The DIFC recently announced an 81 per cent growth in single-family offices during 2023
“Dubai and DIFC have rapidly positioned themselves as the premier destination for family businesses worldwide,” says Essa Kazim, governor of the DIFC. “The exponential growth and expertise witnessed within the centre underscores its pivotal role in shaping the landscape of family wealth.”
The share of women's wealth in the Middle East – until recently considered a collection of highly conservative societies – also continues to increase.
“If you look specifically at the UAE and Dubai, the real estate sector here is a prime example of the continued increase in female-led investments,” says Georgina Atkinson, managing partner at the newly established Origin Private Office, which has transacted more than $100m.
Dubai, Abu Dhabi and Saudi Arabia will “continue to outperform other markets” worldwide regarding diverse investment opportunities and developments, believes Ms Atkinson, who says her firm works closely with some of the region’s leading female entrepreneurs and powerful decision-makers.
“As a woman who resides in the UAE myself, it is incredible to witness the continued empowerment of women throughout the Middle East.”
