Riyadh, 29.10.2023; As the government fosters a favorable environment for the asset management industry to flourish, assets under management (AUM) in Saudi Arabia have reached to more than 25% of the size of country’s GDP, according to KPMG’s latest Asset Management Review 2023 publication.

The publication provides an overview of the emerging themes and changes in the regulatory, tax and Zakat landscape, and analyses the financial performance of twelve large asset management firms as a reference for the industry’s results.

“In line with Vision 2030, the government of Saudi Arabia is undoubtedly fostering a favorable environment in Saudi Arabia for the industry to grow. Especially for its ambitious agenda of giga and mega projects, financing requirements and hence the investment opportunities will continue to rise. The Financial Sector Development Program (FSDP) was also designed to further develop the industry in line with global offerings,” commented by Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia.

As reported by the Capital Market Authority’s quarterly Statistical Bulletin for 30 June 2023, the number of investment funds surged by 35.7% year-on-year, rising from 839 to 1,130. Additionally, the number of public and private investment fund subscribers reported a significant increase, growing from 675,465 to 901,896, representing a 33.5% year-on-year surge. The size of AUM reached SAR 823 billion as of 30 June 2023, from SAR 756 billion as of 30 June 2022.

The net income of all market participants rose to SAR 3.3 billion for the six-months period ending on 30 June 2023, compared to SAR 6.1 billion reported by the industry during the financial year that ended 31 December 2022.

“We assess the shift is in line with higher interest rate environment and volatility in the capital markets due to global recession fears. Investors move their capital to low-risk assets yielding stable return,” commented Saleh Mostafa, Partner, Financial Services at KPMG in Saudi Arabia.

The Saudi Stock Market (Tadawul) is the world’s tenth-largest stock exchange in terms of market capitalization and the largest in the Gulf Cooperation Council (GCC) region.

The publication further highlights important developments in the space of tax and Zakat, noting an approval by the Ministry of Finance of new Zakat rules for investment funds, effective since 1 January 2023. Despite not being subject to Zakat, funds must register with ZATCA and submit an information declaration within 120 days. Also, the Transfer Pricing Bylaws have been amended to include Zakat paying entities for fiscal years 1 January 2024 onwards.

According to the International Competitiveness Yearbook issued by the International Institute for Management Development for 2022, the Kingdom achieved advanced ranks with the indicators associated with the capital market. The country’s ranking increased in nine indicators out of 12 associated with the capital markets, while three indicators maintained the same ranking compared to 2021. The most improved factors included training and education, regulatory framework, and adaptive attitudes.

The asset management industry certainly acts as a catalyst for growing economy as it attracts liquidity from investors with varied risk appetite and offers them wide-ranging assets,” Shahab concluded.