Investments within GCC rises as situation improves
As the economic environment improves, experts expect an increase in onshore investments within the GCC.
"There are multiple wealth trends within the GCC, arising from higher energy prices," Danish Chotani, Director, Senior Private Banker at Dresdner Bank, told Emirates Business, and added that "the key will be how the capital will be deployed regionally and form a beneficial and opportunistic platform for global investors."
According to Investcorp data, there is a new and increasing tendency of GCC investors to make local investments. In 2002, nearly 85 per cent of the Gulf's wealth was invested abroad in financial instruments mostly linked to the US dollar. However, by 2007, this had fallen to 75 per cent due to the rising investment within the Gulf.
Increasing investment in Mena region and Asia led to an amplified demand for alternative investments such as private equity and hedge funds. "I expect a gradual and slow increase in onshore investments within GCC, which would include an allocation to alternative investments. Areas that will witness significant inflows will be direct investment strategies mainly private equity across sectors that are market conducive," said Chotani.
"Debt issuance is also an area that has witnessed revived interest. Most of these trends can be gauged from the increased level of investment sophistication and institutionalisation as well as the important corporate governance in the region, which can build trust and attract global investments in a secure manner," he said.
The outlook for private wealth management in the region is also changing. "Wealthy private banking clients are now demanding sophisticated services such as portfolio risk management, dynamic asset allocation and shrewd investment advice from fund managers.
"To compete successfully, banks will have to review their PWM [private wealth management] strategies from the quantity of private bankers that they can hire to the quality of private bankers that they need to retain. This will create trust, loyalty and most importantly, profits for the wealth management industry. We are witnessing a continuous change from banks, which were used to gathering assets from the GCC and are now established entities are looking to manage assets within the region," said Chotani.
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