Bahrain investment sector AUM up 72.4% in Q3

Introduction of IB license boosts market

MANAMA, Bahrain, Dec 2: The Investment Business Firms sector in Bahrain has been continuing to show strong growth as demonstrated from the figures reported for the third quarter of 2012, compared with the same period last year.

Since the introduction of the Investment Business (IB) license by the Central Bank of Bahrain (CBB) in 2006 to replace the restrictive Investment Advisory License, the number of Investment firm licensees has risen to 50 as of date, with new licensees recognizing the potential in this market, continuing to set up business in Bahrain. Figures indicate that the number of IB licenses granted by the CBB grew from an initial figure of 22 (licensees who were automatically migrated from the old Investment Advisory regime) in 2006, to 50 licenses.

The three categories within the Investment Business license permit firms to undertake any or the full range of activities, depending on their category and line of business, such as investing as principal, asset management, operating a collective investment undertaking, acting as custodian of financial instruments, or offering brokerage and advisory services on financial instruments to clients.

The sector, comprising Firms from all three sub-categories of the Investment Business license, reported total Assets Under Management (AUM) of $16.46 billion as at 30 September 2012. The figure indicates a significant increase of 72.4% over the same time last year in which total AUM was reported as $9.55 billion.

Specialization

Mohammed Ayman Al Tajer, Director of Financial Institutions Supervision Directorate, at the CBB, commented on the rising number of licensees by saying that: “Asset Management is certainly an area of specialization; as market participants expand on their services offering, this would likely increase the size of AUM’s which would in-turn attract more professionals to this market who are capable of engineering and developing financial products aimed at investing regionally as well as internationally.

On the current status of the asset management industry, Al Tajer commented that “the industry currently boasts professionals with a track record and experience in the financial market”. He added: “Opportunities will continue to exist despite any climate pressures, and seizing these opportunities at the right time and at an attractive valuation will, without doubt, lead to the desired exit”.

Abdul Rahman Al Baker, Executive Director of Financial Institutions Supervision, at the CBB commented “CBB is closely monitoring the growth in this important sector and is pleased to see how new market entrants have brought value added activities to the existing industry by introducing new innovative products and structures, revolutionized to suit the region’s investment appetite.”

It has been known that the factors that make Bahrain an attractive base to locate financial business include the comprehensive framework of regulations and financial law governing the asset management sector, all of which have been in place and tested for a considerable period. Additionally, the time zone and proximity of Bahrain to the wealth in the region add to the attraction. The country also has an abundant educated and qualified workforce in the sector.

It is worth mentioning that IB licensees are regulated in accordance with CBB Rulebook Volume 4, which is updated on an ongoing quarterly basis to suit the needs of the market while maintaining international regulatory best practice. Major updates include corporate governance issues, management training and competency and regulatory reporting requirements.