A greater number of investment advisers based in Gulf countries are looking to reduce allocations to a variety of asset classes in Middle East and North Africa (Mena) markets and they say the higher cost of living is affecting how much their clients can save.
Despite strong regional stock market performance, advisers are exercising caution, according to the findings of the fifth annual Middle Eastern Investment Panorama (MEIP) from Insight Discovery, a research house.
Over the year to September 30, the MSCI indices for Qatar and the United Arab Emirates rose by 22.66% and 42.23%, respectively, partly in response to a promotion from frontier market to emerging market status. MSCI’s index for Saudi Arabia also rose by 35.30% in the same period.
However, the number of advisers planning to reduce allocations to almost all of the asset classes covered in the MEIP survey has increased since 2013, with gold, single-strategy hedge funds and cash hit the most. More than 75% of advisers also said the rising cost of living in the region, which affects the amount that people can save, is proving to be a challenge.
Nigel Sillitoe, chief executive officer of Insight Discovery, says that in late 2013, 11% expected to reduce allocations to Gulf Cooperation Council (GCC) countries. This year the figure is 19%.
Additionally, 49% of advisers were looking to lift their clients’ allocations to the GCC last year, compared to 43% this year, and 40% planned to keep allocations unchanged, compared to 38% this year.,
“We suspect that some of the advisers are looking to book profits. However, in a general environment of increased uncertainty, larger numbers of advisers are looking to reduce allocations to almost all the asset classes that we considered in this year’s MEIP survey,” Sillitoe says.
Dhiraj Rai, director for the Gulf and Eastern Mediterranean at Franklin Templeton Investments, says that in the Gulf region the input of advisers is vital. “Given the variety of investment options available today, guidance from a financial adviser is crucial to the process of navigating risk in today’s volatile investment environment.”
The survey shows advisers were more positive about opportunities from the growing numbers of non-resident Indians and other expatriates from South Asia, and were also hopeful about issues such as volatility levels of financial markets.
The 2014 MEIP report surveyed 236 independent financial advisers and wealth managers in the GCC.
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