2018 middle east and north africa regional survey

2018 Middle East and North Africa

Regional Survey

September 2018

Information Classification: General

2

Methodology

• State Street commissioned Oxford Economics to conduct a survey of

306 investment professionals in the Middle East and North Africa

(MENA) region, capturing respondents’ views on market trends and

evolving investment strategies.

• The survey covered 11 countries, with about half of responses coming

from Saudi Arabia and the United Arab Emirates.

• Respondents represented sovereign funds, central banks, asset

managers and pension funds.

• The survey was fielded between August 6-30, 2018.


3

Outlook for Growth Section 1


4

Growth Outlook for MENA Region Strong optimism for economic and capital markets growth over the next five years

78% are optimistic their own

institution will achieve

robust, sustainable

growth over the next

five years

3% 2% 6% 6%

32% 29%

37% 40%

22% 24%

Capital marketsgrowth

Economic growth

Very optimistic

Somewhat optimistic

Neutral

Somewhat pessimistic

Very pessimistic

Source: State Street 2018 Middle East and North Africa Regional Survey

Q4. What is your outlook for economic growth in the MENA region over the next five years? Q5. What is your outlook for capital markets growth in

the MENA region over the next five years? Q7. How optimistic or pessimistic are you that your own institution will achieve robust, sustainable

growth over the next five years?


5

Opportunities and Threats to MENA Capital Markets Monetary policy seen as tailwind; regulation and geopolitical climate are concerns

54%

36%

34%

32%

30%

22%

20%

18%

2%

18%

32%

30%

15%

34%

18%

39%

25%

3%

Monetary policy

Economic growth outlook

Fiscal policy

Emerging technologies

Regulatory initiatives

Fixed income outlook

Geopolitical outlook

Equity outlook

Other

Opportunity

Threat


Q6. What do you view as the greatest opportunities and threats impacting the growth of capital markets in the MENA region over the next five years?

(Respondents could select up to three opportunities and up to three threats.)


6

Institutions’ Growth Priorities Over the Next Five Years Strengthening in-house investment expertise is the top cited growth priority

41%

38%

37%

36%

36%

31%

27%

24%

20%

19%

11%

Strengthen our in-house investment expertise

Invest in technology to improve efficiencies

Consolidate our portfolio holdings

Improve sophistication of our investment riskmanagement

Increase allocations to alternative asset classes

Improve our expense management

Expand our sales and distribution network

Improve our manager selection process

Deepen our relationships with consultants

Expand the products and services we offer

Enter new country markets


Q8. What are your institution’s major growth priorities over the next five years?

Respondents could make multiple selections.


7

Investment in Gulf Cooperation Council Domiciled Funds Three-quarters of respondents believe investment from outside the region will

increase over the next five years


Q9. How do you expect investment from outside the region into Gulf Cooperation Council (GCC) domiciled funds to change in the next five years?

14%

24%

37%

16%

5% 2% 3%

Increase by more than 20%

Increase by 10-20%

Increase by 1-9%

Not change

Decrease by 1-9%

Decrease by 10-20%

Decrease by more than 20%

Don't know

Percentage of respondents who believe

investment from outside the region will:


8

Financial Market Changes to Foster Growth Stronger tax incentives and focus on governance are seen as the most important

financial policy changes to realize regional growth ambitions


Q10. What financial policy changes could cause a significant increase in investment into GCC-domiciled funds from outside the region?

Percentage of respondents ranking each factor as No. 1.

28%

26%

22%

9%

6%

4%

Tax incentives

Stronger legislative and regulatory focus on governance

More consistent cross-border regulation of investmentsacross countries in the region

Deeper local currency markets

Better global recognition of domestic assetmanagement brands

More funds domiciled in region by global assetmanagement brands


9

Additional Drivers of Global Investment More liberal economic and social legislation are considered the key non-financial policy

changes to foster regional growth


Q11. What changes to non-financial law and regulation do you think would encourage global investment in GCC-domiciled funds and markets?

Percentage of respondents ranking each factor as No. 1.

28%

25%

21%

17%

5%

More liberal economic legislation

More liberal social legislation

More political stability

Improved economic infrastructure in region

Strengthened commitment to international legalstandards and institutions in relation to business

transactions and arbitration


10

Evolving Investment Strategies

Section 2


11

New Asset Classes and Portfolio Diversification

30%

43%

18%

9%

Significant changes

Moderate changes

Slight changes

No changes

Portfolio Diversification

44%

41%

38%

33%

31%

31%

22%

18%

2%

EM equities

DM fixed income

DM equities

Private equity

Hedge funds

EM fixed income

Real estate

Infrastructure

Other

Targeted Asset Classes

42%

13%

39%

6%

Increasing usage

Decreasing usage

No change in usage

Don’t know

Usage of ETFs

A majority of investors in the region are entering new asset classes; 42% are

increasing their usage of exchange traded funds (ETFs)


Q14. Is your institution moving into new asset classes to increase portfolio diversification? Q14B. What new asset classes are you targeting to

increase your portfolio diversification? Q13. Is your institution changing its usage of ETFs?

DM = developed market

EM = emerging market


12

Environmental, Social and Governance (ESG) Strategies Increasing appetite seen for ESG in the MENA region over the next five years

32%

57%

9%

2%

High

Moderate

Low

None

Institutions’ Own Appetite for ESG

14%

16%

43%

19%

5%

1%

0.3%

2%

Increase more than 20%

Increase 10% to 19%

Increase 1% to 9%

No change

Decrease 1% to 9%

Decrease 10% to 19%

Decrease by more than 20%

Don’t know

Predicted Investor Demand for ESG


Q15. How would you describe your institution’s appetite for environmental, social and governance (ESG) investment strategies over the next five

years? Q16. Do you believe investor demand for ESG strategies across the MENA region will change over the next five years?


13

Data Management Section 3


14

Data Management Increasing data complexity is posing challenges and prompting changes

56%

44%

57%

Investments’ growing complexity has created data management

challenges

We have major gaps to address inour current data management

framework

We are seeking to outsource moreof our data management

Agree

Data Management Framework Challenges Operating Challenges

33%

36%

20%

10%

1%

Sourcing the right talent and expertiseEnriching the dataAggregating the dataProducing accurate, timely reportsOther


Q17. Please rate your level of agreement or disagreement with the following statements about data management at your institution.

Q19. Which aspect of data management is most challenging for your institution? (Select only one.)


15

Effectiveness of Data Integration Significant gaps exist in the integration of internal and external data sources

Data Integration Effectiveness

34%

55%

9% 3%

Highly effective Moderately effective

Slightly effective Not effective


Q18. How effective is your institution today in integrating all of its data from internal and external sources?


16

Important Information

Investing involves risk including the risk of loss of principal.

This document and information provided herein is for marketing and/or informational purposes only and does not constitute investment advice

and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account

any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not

guarantees of any future performance and actual results or developments may differ materially from those projected.

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Expiration Date: 9/30/2019

2018 middle east and north africa regional survey

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