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| Billionaire Wealth |
$1 Trillion Flows into the Gulf: A New Generation Reshapes Wealthy Families' Investments
Hedge funds and law firms are flocking to the Gulf states in preparation for one of the largest intergenerational wealth transfers. It is estimated that up to $1 trillion in family wealth could be transferred to the next generation within a few years.
Wealth transfers in this wealthy region of the world are bringing with them some changes. While family offices have focused on retaining a large portion of their cash and investing heavily in real estate, a Bloomberg report indicates that the new generation is taking on greater risk by allocating a portion of their investments to cryptocurrencies and hedge funds.
Bloomberg quoted the story of twin brothers Abdulaziz and Abdulla Kanoo, the fifth generation of a Bahraini family spanning over 135 years, about their shift toward bolder investments after they suggested investing in Bitcoin to the family office manager in 2020.
It was the first time they had proposed a deal directly to the family office, despite their previous venture capital investment experience. James Burke, head of the Kanoo Group's public markets unit, didn't hide his concern about the risk and began writing a paper refuting the idea. Over time, however, he realized the two men might be right.
After presenting the idea to the group's investment committee, it received approval despite reservations from some older members. A small amount was invested in Bitcoin and sold last year at a profit.
The twins established their own company in Dubai, specializing in digital asset services and managing cryptocurrency investments for external clients and other family offices. Meanwhile, the Kanoo Group continued its exposure to cryptocurrencies, but through hedge funds.
This bold move reflects a significant shift in one of the world's largest family wealth coffers: wealthy families in the Middle East, who are poised to transfer an estimated $1 trillion to the next generation over the coming years, amid a growing trend toward professional wealth managers.
From Real Estate to Alternative Assets
Globally, wealthy individuals are shifting toward new assets, but the shifts within Gulf families are more pronounced, after decades of focusing on real estate or private businesses. Today, global financial institutions such as Citigroup, Barclays, and Deutsche Bank are strengthening their teams in the Gulf to attract this wealth.
Some family offices, such as the Kanoo Group, have been pioneers in investing in hedge funds and private credit, but the entry of more families into these fields opens the door to significant growth in these industries. Matias Gonzalez, head of investments at Barclays Bank in the Middle East and Switzerland, said, "Wealth accumulated in the Middle East is now facing an unprecedented transfer of wealth," noting that this shift is attracting the attention of legal advisors and estate planning experts.
Hedge Funds
Dubai is now home to more than 70 hedge funds, while Abu Dhabi hosts global names such as Brevan Howard and Marshall Weiss. This increased presence facilitates direct contact with families, says Edwin Lawrence, CEO of Nettlestone Capital in Dubai, which acts as an intermediary between hedge funds and regional investors.
But winning the trust of Gulf families is not easy. According to a joint report by HSBC and Campden Wealth, family office portfolios in the Middle East remain more liquid and hold significant stakes in real estate compared to their counterparts in North America and Europe. Their access to high-risk assets such as cryptocurrencies, hedge funds, and private credit remains limited, amid a divergence in perspectives between younger and older generations, and the presence of multiple layers of governance before making decisions.
A Generation with a New Mindset
"Being a family business means there are multiple layers of governance and risks to navigate," said Abdulla Kanoo. Bhaskar Dasgupta, head of Apex in the Middle East and India, believes that Gulf families are starting to hire professional investment managers who are more receptive to hedge funds, noting that "cryptocurrencies are very popular among Emirati families." He added that the new generation is turning to hedge funds that invest in digital assets, crypto funds, and even crypto real estate assets.
At an event organized by Apex in Abu Dhabi last year, hedge fund strategies such as "long/short" and "macro" were among the most sought-after strategies by local allocators. The new generation is also becoming more willing to lend their Gulf assets to hedge funds through securities lending programs, with higher returns, according to James Augustine, head of primary brokerage at BNP Paribas for the Middle East and Africa.
Global Diversification… and Ethical Investments
A survey conducted by Tharawat revealed that more than 70% of individual family offices in the Middle East participate in private equity investments as co-investors, while nearly 60% invest in venture capital, seeking opportunities to fund startups. Citigroup data indicates that portfolios are becoming more diversified, with significant allocations to the United States, some to Europe, and growing interest in Asia.
Amid this shift, Dubai and Abu Dhabi have become home to wealthy families from around the world, opening the way for regional family offices to engage with new trends. Ahmed Al Ahmadi, CEO of Al Baher Real Estate in Abu Dhabi, said his family has become more active in alternative investments, partnering with trusted entities and focusing on private credit in the US market.
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