Wealthy individuals in the Middle East are keen to put their money to work locally as opposed to offshore, although for international investments they favour emerging markets, finds a study from the Qatar Financial Centre Authority and London-based Campden Wealth.
Forty-seven ultra-high-net-worth individuals from the GCC countries, as well as Lebanon, Syria and Egypt, took part in the survey.
Some 60% of respondents were members of family businesses, with the survey noting that family businesses control as much as 75% of private sector economic activity in the GCC.
Fifty-five percent of the respondents indicated an interest in continuing to invest their wealth in the Middle East, with financial centres such as Doha seen as a safe haven. It’s a theme among the wealthy globally, who often prefer investing in familiar markets to gain competitive advantage.
However, for offshore investments, Middle Eastern high-net-worth individuals favour emerging markets over developed economies, with Africa high on their list.
“We feel that Africa offers the perfect combination between the dynamism of an emerging opportunity, the familiarity with the culture and the geographic proximity. Everything needs to be done there, and the opportunities are very attractive,” one family business executive in Oman says.
“At the same time, quite a few investors are scared of venturing into Africa because they see it as too risky. In contrast, that is something we relish.”
Among developed markets, Middle Eastern investors preferred investing in Europe over the US, surprising perhaps given economic stagnation in the eurozone and pick-up in the US.
The survey notes the primary reason is familiarity – many individuals in the Middle East went to school in London and holiday in France and Switzerland. There is also tension between the Middle East and the US “amid an increasingly strident and partisan political environment”.
Wealth owners feel that these problems between the Middle East and the US are much harder to solve than the debt issues in Europe.
Some 60% believe in wealth creation rather than wealth preservation, with returns under 8% not satisfactory, although they prefer to earn high returns on low-risk investments, which is why a large chunk of money is in real estate and cash. Alternative strategies, namely hedge funds and private equity, remain popular, however.
Middle Eastern investors’ relationship with their private banks is mixed. While 40% had an “excellent relationship with their private banker and/or wealth manager”, 80% felt the bankers did not take responsibility for consequences of their advice. Respondents also want more transparency on fees.
The survey also notes that participants feel more confident in their abilities to evaluate the quality of wealth management advice they receive.
Further, 46% of respondents say they are active in managing their assets, and 47.3% very active. Only 6.7% described themselves as passive investors. Some 74% expressed an interest in having a bigger role in the investment decision-making process.
There are an estimated 2,500 family offices in the Middle East.