According to Bas Kooijman, CEO and Asset Manager of DHF Capital S.A., assets under management in the UAE robo-advisors market are expected to reach approximately AED 58.46 billion in 2023, with a compound annual growth rate (CAGR 2023-2027) of 12.06%, for a total amount of approximately AED 92.19 billion by 2027. With this anticipated rise, Kooijman explains why the future of financial management will rely significantly on robo-advisors.
Robo-advisors, which utilize mathematical algorithms to deliver competent financial advice, are becoming increasingly popular in the UAE, with an estimated 1.1 million market users by 2027. This anticipated increase in investors seeking to leverage the power of algorithms to grow their investments can be attributed to a number of factors, including lower fees and a higher return on investment (ROI) than human advisors or the traditional banking system, with most robo-advisors charging around 0.25% per year.
The launch of Chat GPT, which registered five million new users on the day it was released, is also contributing to this investment market renaissance. More people realize the advantageous use cases of AI across all industries, and with UAE National Strategy for Artificial Intelligence (AI) 2031 outlining a blueprint for the country to be the most prepared in the world for the adoption of this world-revolutionizing technology, its implementation is set to greatly enhance the country’s financial landscape in the coming years.
According to the UAE government, an estimated increase in economic output of AED 305 billion is expected by 2035. This is due to the application of AI in various sectors, and as it pertains to the finance industry, AI will be a primary contributor by injecting 103 billion of this total into the country’s economy.
Bas explained: “Algorithms and algorithmic methods have been with us already now for a very long time, and AI is now reshaping how consumers and companies alike access and manage their finances. With predefined rules, computers can be programmed to explore markets for the benefit of clients and when those rules match reality, an alert can be issued to a portfolio manager to help them further minimize risk and maximize profit. This automation essentially provides security while enabling a portfolio to maintain a high-class liquidity level.”
For traders, algorithms have the potential to make thousands of trades per second if set right; a 2019 study showed that around 92% of the Forex market was performed by algorithms, rather than humans. Bas’ securitization firm, DHF Capital, has leveraged the power of algorithms to provide investors in the region, and across the globe, with an annual average ROI of 20% since its inception; investors who have worked with him since the company’s inception have witnessed a 114% ROI, more than doubling their initial investment.