UAE's wealthy least affected by crisis

Only 21 per cent of the high net-worth individuals (HNWIs) from the UAE say that their personal net worth has been substantially negatively impacted by the global economic downturn, a new report has revealed.

The report, titled 'The Changing Wealth of Nations', published by Barclays Wealth in co-operation with Ledbury Research, includes a survey of more than 2,000 respondents covering more than 20 countries.

"This has been a challenging few years for investors generally, and the wealthy have not emerged unscathed," the report points out.

Thirty-eight per cent of respondents globally report that the recession has had a 'negative' or 'quite negative' impact on their net worth, with respondents from Spain (65 per cent), Ireland (65 per cent) and Qatar (53 per cent) among those saying that their personal net worth has been very or quite negatively affected by the downturn.

On the other hand, less than a quarter of respondents from the UAE (21 per cent), India (18 per cent) and Singapore (15 per cent) say the same.

"Some 65 per cent of respondents in both Spain and Ireland declare that the downturn has had a 'negative' or 'quite negative' impact on their net wealth; at the other end of the scale were respondents in Singapore (15 per cent). Respondents from the UK and US fall in the middle of the range – 43 and 37 per cent, respectively, reporting a 'negative' or 'quite negative' impact," the report states.

At the same time, reflecting the short-term trends in the local property market, only 17 per cent of the UAE's HNWIs believe that real estate will perform quite or very well in the short term (one year) but a vast majority (77 per cent) of them are positive on real estate in a five-year time horizon.

The report tells an interesting story about HNWIs in the GCC and their investment attitudes and behaviour, priorities in socially responsible spending, as well as their outlook on specific asset classes in the medium term. These factors combine to create an optimistic outlook for positive economic growth globally, as well as in the GCC, among the wealthy in Saudi Arabia, Qatar and the UAE.

GCC upbeat

The report reveals that the gloom about the global economy is by no means universal. HNWIs in the GCC countries surveyed are more optimistic on the performance of the global economy and their own local economies. A vast majority of HNWIs from the UAE (81.20 per cent), Qatar (88.70 per cent) and Saudi Arabia (70 per cent) believe that the global economy will grow over the next few years, with a minority considering that growth will take place after a slight deterioration in the near term.

Conversely, figures reveal that 60 per cent of the aggregate of global HNWIs believe that the world economy will be stable or even deteriorate in the near future. This optimism in the GCC's HNWIs can be linked to forecasts on various asset classes. Almost all HNWIs in the UAE, Saudi Arabia and Qatar say that equity and property will increase in performance over a five-year horizon. HNWIs from the region have been quite certain about their outlook on various asset classes, with few surveyed responding 'don't know' on questions relating to asset class performance.

In terms of real estate, approximately three-quarters of all HNWIs in the UAE (77 per cent), Qatar (77 per cent) and Saudi Arabia (74 per cent) believe that property will perform quite well over the coming five years.

Furthermore, the UAE (73 per cent) and Saudi Arabia (78 per cent) believe that equity in the medium term will outperform equities in the short term. In the meantime, the majority of HNWIs in Qatar believe that the performance of the equities market in the short term will match the medium term performance, with only 32 per cent considering that equities' market performance will increase in the future.

Soha Nashaat, Chief Executive of Barclays Wealth Middle East, said: "The global survey reveals that HNWIs' enthusiasm for equities and property continues and will likely sustain over the next five years. A degree of investor caution remains after the downturn but wealthy individuals remain engaged with the markets, and demonstrate a considerable degree of self-reliance and composure. GCC HNWIs exert a more positive outlook than some of their global counterparts on the performance of the global economy as well as their own over the next five years."

The impact of the global downturn has encouraged HNWIs to become more informed about investment and to play a more active role in investment decision-making. Globally, over a quarter are spending five or more hours a week reviewing their portfolios, and three-quarters of respondents see themselves as interested in, and knowledgeable about, finance and investment.

GCC HNWIs – The most engaged investors

There is a near universal consensus by GCC HNWIs on the importance of time spent on actively engaging with their financial manager in the construction of their investment portfolio. The notion of the wealthy as passive investors has become out of date and HNWIs, particularly in the Gulf states, are taking a more hands-on approach in managing their investments. Ninety per cent of those surveyed in the UAE, 76 per cent in Saudi Arabia and 70 per cent of respondents in Qatar spend an increasing amount of time actively managing their portfolios. In fact, 73 per cent of UAE investors spend more than 20 hours a week on managing their investments.

"Investors in the GCC are some of the most savvy in the world, and this report shows why: HNWIs in the region spend more time reviewing and adjusting their portfolio. This engaged approach to their investments is a trend that is gaining global momentum and will ultimately help ensure that financial managers are understanding and meeting the needs of their clients," said Nashaat.

The survey's findings of a relatively small fall in respondents' income levels can be interpreted in different ways. A large proportion of respondents in some countries (eg Ireland) report falls in income and bonuses. But, in contrast, only 16 per cent of those in the UK think that the recession has had a quite or very negative impact on their salaries and bonuses – and only 19 per cent of those in the US think likewise.

Corporate profitability also appears to have held up well in many countries. Overall, some 25 per cent of survey respondents say that the profitability of their company has been quite or very negatively affected by the recession – exactly the same proportion who thought that the recession had had no impact or a positive impact on profitability. Again, this sits oddly with the falls in profits recorded by national accounts statistics or by publicly reported companies.

Part of the reason for this discrepancy may be suggested by the substantial country-by-country variations. Corporate profitability has been badly hit in Ireland, South Africa and Spain (54, 48 and 40 per cent respectively) but has held up well in the UAE, Switzerland, Singapore and Australia.

As further evidence of this proactive and engaged attitude, respondents in Saudi Arabia, Qatar and the UAE are taking a more socially aware attitude towards their lifestyle and becoming increasingly more involved with their communities.

These HNWIs rank in the top five globally in the time spent volunteering for charity; 47 per cent of those surveyed in the UAE, 48 per cent in Saudi Arabia and 47 per cent in Qatar, are giving money to charitable causes.

Further, a majority of HNWIs in the region (Qatar – 62 per cent, Saudi Arabia – 78 per cent, and the UAE – 43 per cent) would only buy products that have been ethically sourced.

Commenting on this emerging trend in the region, Nashaat said: "We believe that the region's wealthy will change their attitudes to wealth over the next decade, with an increasing role possible for socially-inspired wealth transfer. This will be reinforced by a growing number of young wealthy, more inclined to question the functioning and purpose of wealth investment. The increasingly number of wealthy women will also add to pressure for change, both in terms of information provision and their perceptions of desirable investment priorities."

The responses also reveal climate change to be an important, if not an overwhelming issue. HNWIs in Qatar (70 per cent), Saudi Arabia (62 per cent), and the UAE (38 per cent) are increasingly concerned about climate change, which is in line with global trends. The report reveals that 56 per cent of HNWIs around the world are also concerned about climate change and 42 per cent often encourage friends to buy more environmentally friendly products.

The report quotes Wadah Abusin, Co-founder and Commercial Director of Ecobility Energy Solutions in the UAE, arguing that social impact is becoming a key component in the investment decision-making process. In part, this is because "socially-responsible companies continue to outperform their peers in the long run".

But he also highlights two specific reasons why "green" investments may appeal to the wealthy. "Energy technology ventures typically require substantial R&D spend, which may depress returns in the short run. But, through the capacity to create reverse innovation or develop disruptive technologies [those that impact markets in a substantial and unanticipated fashion], offer the opportunity for longer-term gains. In addition, they recognise the benefits that exposure to renewables can bring to their portfolio from a diversification point of view, especially in a regional economy underpinned by hydrocarbons."

Abusin draws a distinction between those who are looking for exposure to a particular sector: Those who will tend to take a more hands-off approach, and those who want to enter the sector and add the green element to their existing businesses – who tend to be much more involved.