Thirty-six per cent of UAE-based high net-worth investors will increase their level of risk over the next 12 months, according to a new report.
While 21 per cent of such investors feel there are significant investment opportunities in the current market, 71 per cent still perceive the risk as being too high, Barclays Wealth and the Economist Intelligence Unit (EIU) said in its report titled "New horizon, new behaviour".
Barclays respondents from the UAE are most likely to increase their allocation to real estate, "where they still see opportunities". Attention to due diligence, the term used to denote an elaborate investigation of an investment opportunity, is rising up the priority list for many high net worth individuals in the UAE, Barclays Wealth said.
"High net worth investors are sticking with the status quo," the report said, and added that such investors are seeking the comfort of simplicity and familiarity and are laying a greater emphases on transparency. While the United Kingdom leads in willingness to make "higher-risk investments", at 32 per cent, United States at 31 per cent, and UAE at 27 per cent compared to the remaining seven economies including Hong Kong, Canada, Switzerland, Singapore, Monaco, India and Spain, it said.
While nearly 90 per cent of Barclays respondents globally said there were opportunities in the current market, 68 per cent of them rued that the risks of further price falls are still too high to consider them.
"In general, though, there is a very strong consensus that now would be a good time to make certain investments. Yet at the same time, fear is preventing the majority of high net worth individuals from re-entering the markets," the report said.
Behavioural finance experts that Barclays consulted suggested that a pervasive "fear of regret" is impeding more decisive action among many wealthy investors.
Soha Nashaat, CEO of Barclays Wealth Middle East, said: "High net-worth investors should not be considering what happens over the next month as important, but rather what happens over the next five, 10 or 20 years. With an appropriate time horizon in mind, short-term fluctuations in market prices become less important and the real value of investment opportunities can be more objectively assessed."
Globally, 58 per cent said they would make no change to their allocation of domestic stocks, while 65 per cent said that they would neither increase nor decrease their exposure to hedge funds.
However, Barclays executives emphasised that re-considering investment strategy is essential under the prevailing circumstances.
"One of the consequences of this sensitivity to loss is that investors become reluctant to make changes to their investment strategy or asset allocation. However, it is necessary to review one's asset allocation to best leverage current and predicted market conditions lest the investor miss the inevitable positive turn in the cycle."
Trust on government institutions is one area where the UAE scored particularly well. About 48 per cent of the respondents in the UAE felt that the steps taken by the country's central bank to contain the crisis have been successful. About 41 per cent felt the same about the steps taken by the country's government. These figures were the highest in the world.
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