Fund managers cut portfolio requirements

Dearth of liquidity has forced the reduction in minimum requirement. (SUPPLIED)

Fund managers in the Gulf have reduced the minimum requirement for managing individual portfolio to one-fourth of the previous amount, Emirates Business has learnt.

Asset managers are now identifying new groups of people that had so far not been considered worthy of tapping for managing individual portfolios.

"We have reduced the minimum amount of assets required for private portfolio management from $20 million (Dh73.4m) to $5m over the past one year," said Seid Suleman, President, Miraj, a Canada-based company that attracts a lion's share of investments for its 'Miraj gold and precious metals private portfolio' from the Gulf.

"There were talks of reducing the amount to $1m but that was not feasible for us. That's because as fund manager we charge one per cent as management fee and that's a good proportion of $1m," Suleman added.

Other wealth managers are targeting even lower portfolios. The CEO of BNP Paribas Wealth Management (GCC) Serene El Masri earlier said that the bank now considers Non-Resident Indians (NRIs) with a potential to invest $ 1m as an important target.

"NRIs come into all streams of investor segments and there is a good number of high net-worth individuals among them," she said. Technically people with a potential to invest $1m are considered high net-worth individuals.

Kashif Arbab, Managing Director of Killik & Co (Middle East and Asia), said that the reduction in minimum amount required for managing a portfolio is a result of "dearth of liquidity", "lots of competition" and a "difficult landscape for performance".

"There are too many fund managers providing services today. Furthermore, high net-worth individuals and institutions have developed a preference for products such as Exchange Traded Funds (ETFs)."

Analysts term this a part of a "cyclical process" wherein fund managers lower the minimum amount required for managing an individual portfolio when the markets become illiquid. "When volumes are low, people start lowering their volumes to bring business. And when volumes rise, they begin to focus on attracting high net-worth individuals again," said Jahangir Aka, Senior Executive Officer, SEI Investments.

Aka said individuals and institutions in the region are beginning to allocate more funds to offshore markets. "People had been investing heavily into the local markets earlier, but the trend has reversed. Massive investments are now flowing into the offshore markets."

 

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