Khurram Jafree, Head of Investment Advisory, Barclays Wealth MENA
According to a recent study by Barclays Wealth, 72% of High Net Worth Individuals (HNWIs) in the UAE have investments in real estate, the most held asset class. The survey revealed mixed sentiments about continuing to invest in real estate over the next 12 months, with 42% of respondents considering this asset class risky and an almost equal number (40%) having a completely divergent view and consider it a safe option.
The report, Risk and Rules: The Role of Control in Financial Decision Making, is based on a global survey of more than 2,000 HNWIs, and provides an in-depth examination of wealthy investors from a behavioural finance perspective. In addition to considering the different financial personality traits that exist amongst wealthy investors, the report highlights their views on nine main asset classes: real estate; cash; alternative strategies (long/short funds, arbitrage etc); equities from both developed and emerging markets; bonds from developed governments, blue-chip corporations and high yield/emerging markets; and commodities.
Khurram Jafree, Head of Investment Advisory, Barclays Wealth – MENA, said: “This report provides a fascinating insight into the risk appetite towards various asset classes and provide a cross sectional assessment on the financial personalities of high net worth individuals in the UAE. Investors place significant importance to getting market insights and are willing to delegate their investment decisions to financial advisors to achieve optimal returns. UAE investors also differentiate themselves among other HNWIs by showing a preference toward liquid investments. These insights set the benchmark for the wealth management industry and support the bespoke approach utilised by Barclays Wealth in providing financial products and solutions.”
The report also revealed that 68% of UAE respondents consider investment in developed government bonds safe. Investments in corporate and investment grade bonds do not fare as well and are considered safe by only 34%. High yield and emerging market bonds are considered risky by 60% of investors. Furthermore, surveyed HNWIs demonstrated a higher appetite towards government bonds compared to equities and other fixed income assets, which is also in line with the trend seen across all 17 markets covered in the report.
UAE investors see a similar amount of risk in both emerging and developed market equities: 42% consider emerging market equities risky investments while 40% believe developed market equities are risky too. Cash remains one of the safest investment strategies for high net worth individuals (HNWIs) in the UAE with 84% of investors believing that it is a safe proposition over the next 12 months - the highest proportion in the region and second highest globally. In the UAE, cash is the second highest most held asset class with 70% of the surveyed HNWIs currently invested in cash.
As far as investments in commodities are concerned, 44% of UAE investors view them as risky - a higher proportion than any other markets in the Middle East and second highest among all 17 markets and regions covered by the survey. Results show that only 16% of HNWIs in the UAE chose to include commodities in their investment portfolios, as they are generally not viewed as a safe asset class.
When it comes to alternative strategies, 56% of those surveyed believe it to be a risky asset class over the next 12 months. Just 18% of respondents find this asset class safe and thus, only 14% are currently invested in alternative strategies.