How family offices are spreading their wings in the Middle East
Family offices in the region are maturing fast, adopting more institutionalized governance, diversifying their holdings and hiring aggressively to boost their capabilities. Taking a leaf from their nations’ sovereign wealth funds, they are also playing a more active role in economic transformation.
The growth and maturity of family offices has emerged as a key feature of the Middle East’s burgeoning wealth management sector.
“Historically, family offices in the Middle East concentrated their investments in real estate, because it’s tangible and provides stable returns,” said Ayman Abouhend, Chief Investment Officer at Significa Ventures. Then came the 2009 property crash in Dubai, which he said served as a wake-up call to adopt greater portfolio diversification and more institutionalized governance.
As Ali Janoudi, Head of New Markets at Lombard Odier Group, put it, what came next was a “professionalization of family offices.” This has been accelerated by recent growth in the number of ultra-high-net-worth investors in the region, he said, increasing demand for more structured and institutionalized wealth management approaches. “Family offices are becoming more sophisticated, leveraging global best practices to preserve and grow wealth across generations,” he added.
In line with that shift, family offices in the Middle East have diversified their strategic portfolios with investments in technology, renewable energy, healthcare and infrastructure, as well as investments abroad and in private equity.
Family offices in the Middle East continue to have a considerably higher allocation to real estate than their global peers, at 15% compared to the worldwide average of 10%, according to the UBS Global Family Office Report 2024 (see Figure 2).
But higher exposure to real estate among Middle East family offices should not be taken as a sign of lingering conservativism in their investment style. It’s worth noting that they also have a higher allocation to private equity (28%) than the global average (22%).
The higher allocation to real estate could perhaps be a consequence of optimism about the region’s property markets. As well as an ongoing property boom in the United Arab Emirates (UAE) that is being driven by an influx of new businesses and residents, prospects are also bright for real estate in Saudi Arabia “because the country is focused on developing so many industries, and more and more people are moving to the region,” said Ekaterina Chernova, Founder of family-office-as-a-service provider Octagon.
Figure 2: Share of alternative assets in family offices, 2023
| Alternative asset classes | |||||||||
|
Global |
US |
Latin America |
CH |
Europe |
Middle East |
Asia-Pacific |
North Asia |
SEA |
|
| Private equity |
22% |
35% |
18% |
18% |
22% |
28% |
19% |
18% |
18% |
| Direct investments |
11% |
21% |
8% |
10% |
11% |
10% |
9% |
8% |
10% |
| Funds/ funds of funds |
11% |
14% |
10% |
8% |
11% |
18% |
10% |
10% |
8% |
| Real estate |
10% |
10% |
7% |
13% |
12% |
15% |
6% |
7% |
6% |
| Hedge funds |
5% |
8% |
2% |
3% |
4% |
5% |
6% |
6% |
5% |
| Private debt |
2% |
4% |
3% |
1% |
3% |
2% |
2% |
2% |
3% |
| Gold/ precious metals |
1% |
0% |
1% |
6% |
1% |
0% |
0% |
1% |
0% |
| Art and antiques |
1% |
1% |
0% |
2% |
1% |
1% |
1% |
0% |
3% |
| Commodities |
0% |
1% |
0% |
0% |
0% |
0% |
0% |
0% |
0% |
| Infrastructure |
1% |
1% |
1% |
1% |
1% |
1% |
0% |
0% |
1% |
Meanwhile, family offices in the Middle East have the lowest allocation to fixed income globally, in part because those who follow Islamic finance principles need to avoid interest-bearing products. Another survey of family offices in seven countries across the MENA region conducted by Campden Wealth, a global membership organization for wealthy families, and HSBC Global Private Banking, found that around a third practice Sharia-compliant investing (Figure 3).
Local considerations
The need to navigate the intricacies of Sharia-compliant investment products, along with differing financial regulations across the region, are among the main challenges faced by family offices and wealth managers operating in the Middle East, said Janoudi. “They must be well-versed in the varying laws, tax treaties, and compliance frameworks,” he said.
This could, however, create an opportunity to tailor bespoke investment products for the region, such as instruments that merge Sharia-compliant investing and sustainability objectives. Abouhend explained that “both ESG and Sharia-compliant avoid alcohol, gambling and sectors that can harm the earth. Family offices that usually only invest in Islamic finance instruments could redirect some of their investment to ESG products, giving them some sort of increased exposure to global finance.”
Janoudi observed that “the convergence of Islamic finance principles with sustainability objectives is creating new opportunities for regional and international investors alike.”
Two organizations spearheading this shift are SEDCO Capital, a Saudi Arabia-based Sharia-compliant investment firm, and the Dubai Islamic Economy Development Centre, which, according to Abouhend, have been encouraging family offices to adopt ethical investment practices aligned with Islamic principles.
Winds of change
According to Abouhend, the arrival of a new generation of family members, many of whom were educated in Western countries, is also playing a major role in driving change across the region’s family office investments. “The first generation accumulated the wealth, and the second generation is now in play," he said. “They are bringing the institutional and governance frameworks they’ve gained through education and other experience and applying it to this accumulated wealth.”
Middle East family offices have also been inspired by the region’s sovereign wealth funds, which have been making bold investments in several future-facing industries at home and abroad — not only to support local economic diversification efforts, but also in search of improved through exposure to growth companies or growth sectors. “Family offices are following in the footsteps of their nations’ sovereign wealth funds,” said Abouhend.
Of course, family offices have far less capital than sovereign wealth funds, so they need to be more selective in their exposures. “A sovereign could invest in up to 20 different sectors, but family offices need to focus on a subset of these,” said Abouhend. For example, in the UAE, the Al Ghurair family has chosen to invest in startups developing agricultural technology and improving the UAE’s food security, while the Al Nowasi family concentrates on renewable energy and climate tech through its AMEA Power subsidiary.
Furthermore, Janoudi pointed out that “while sovereign wealth funds drive large-scale economic initiatives, wealth managers are facilitating capital allocation into emerging opportunities, private markets, and impact-driven investments.” He added that as the Middle East’s financial ecosystem matures, he expects family offices and wealth managers “to play a more significant role in shaping the region’s investment landscape, alongside private equity firms and hedge funds.”
Influx of wealth
Another big trend shaping the Middle East family office landscape is the arrival of wealthy families and family offices from around the world. “We are seeing a growing complementarity between local and international players — the former are adopting more sophisticated investment strategies and global best practices, while the latter are tailoring their offerings to align with regional preferences,” said Janoudi.
Given that the Middle East family universe is relatively small, new arrivals can have a considerable influence. Of the estimated 8,030 family offices around the world in 2024, some 290 are located in the region, according to the latest edition in Deloitte Private’s Family Office Insights Series.
That number could grow rapidly in coming years given the influx of wealth to the UAE and Dubai in particular. Dubai is continuing to build on momentum established during the COVID-19 pandemic, when it became one of the first global destinations to reopen to international visitors in July 2020, said Chernova. Before that, several rule changes had made it easier for foreigners to move to and invest in the UAE, including the launch of the Golden Visa scheme in 2019 and the scrapping of the 49% cap on foreign ownership of local companies in 2020.
Janoudi said that the rapid expansion of the UAE’s wealth management sector is “driven by economic diversification, a favorable regulatory landscape, and investor-friendly policies.” He singled out Dubai and Abu Dhabi, the country’s financial centers, for their strong regulatory frameworks, tax advantages, and world-class financial infrastructure, “ensuring a transparent and stable environment for wealth management firms and family offices.”
Saudi Arabia, too, is attracting wealthy expats and international financial institutions thanks to its Vision 2030 initiative, said Janoudi. “This initiative aims to diversify the economy beyond oil, enhance foreign investment opportunities, and foster a dynamic financial sector. Riyadh is rapidly emerging as a major financial center, attracting global wealth managers and institutional investors,” he said.
Then there’s Qatar, which “is also gaining recognition as a financial hub with a focus on wealth management. It offers a strong financial services sector, regulatory incentives, and close proximity to major Gulf markets, making it an attractive location for family offices and investment firms,” said Janoudi.
Abouhend said that all these locations have introduced more favorable regulations not only to attract family offices from abroad, but also to lure back some of the dry powder held by Middle East family offices in overseas wealth hubs like Luxembourg, Switzerland and London.
Increasingly vibrant
International family offices arriving in the Middle East tend to begin with a conservative approach, said Chernova. “It’s very step-by-step. First, they start with real estate, then perhaps fintech,” as they test the waters with easy-to-understand investments before plunging deeper. And although “they initially don’t bring a lot of money to invest,” in an effort to learn more about the market “they bring in considerable talent and expertise to the region.”
This is influencing local family offices, said Chernova, which have responded by raising the level of their own in-house expertise by hiring more talent. “So, the overall level of expertise of the private equity and family office sectors here is growing day by day, which is fascinating to witness.”
“Family offices are hunting for high level specialists, for investment bankers, McKinsey partners, Harvard graduates and CFA® charterholders,” she added.
This will bolster family offices’ capacity to invest in and catalyze projects in areas once thought to be the domain of investment banks, sovereigns and venture capital funds, said Chernova.
And crucially, it has become easier for family offices in the Middle East to attract this type of talent “because it’s not routine anymore,” she said. “It's not only looking at what building to buy in London or which stock to buy on the US market. It’s much more exciting now.”
Discover more on Middle East investment trends:
Will the Middle East’s transformation bolster its burgeoning stock markets?
Middle East agritech investors are sowing the seeds of global food security
The evolution of the Middle East VC ecosystem
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