Despite the huge value erosion faced by the UAE's property sector following the global financial crisis, a recent survey of UAE-based high net worth individuals (HNWIs) by Barclays Wealth showed the majority of the nation's wealthy still preferred property as a safe asset.
The study showed 72 per cent of HNWIs surveyed in the UAE have investments in property. While more than 40 per cent of the people who participated in the survey believed property investments had great upward potential, about 42 per cent considered it risky.
Cash remained one of the safest investment strategies for the UAE's wealth with 84 per cent of investors believing it to be a safe proposition over the next 12 months.
The Barclays study was based on a global survey of more than 2,000 HNWIs. It considered the different financial personality traits that exist among wealthy investors and the different self-imposed rules and strategies they put in place to deal with these traits.
The report highlighted investor views on nine main asset classes such as property, 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.
"The UAE investors place significant importance to getting market insights and are willing to delegate their investment decisions to financial advisers to achieve optimal returns," said Khurram Jafree, Head of Investment Advisory, Barclays Wealth, Mena (Middle East and North Africa). The World Wealth Report published by Merrill Lynch and Capgemini last month showed the global HNWI population and wealth growth reached more stable levels in 2010, with the population of HNWIs increasing 8.3 per cent to 10.9 million and HNWI financial wealth growing 9.7 per cent to $42.7 trillion (Dh157 trillion).
In 2010, the Middle East had one of the highest growth rates after Africa, with the number of HNWIs with more than $1 million in wealth rising by 10.4 per cent. In the UAE, the HNWI population declined by 3.5 per cent to 52,600 in stark contrast to the larger decline of 18.8 per cent decline in 2009
The decline was attributed to relatively lower economic growth and depressed valuations of key asset classes such as equities and property. According to Barclays Wealth 68 per cent of UAE HNWIs considered investment in developed government bonds safe. Investments in corporate and investment grade bonds did not fare as well and were considered safe by only 34 per cent while high yield and emerging market bonds were considered risky by 60 per cent.
The majority of HNWIs from the UAE demonstrated a higher appetite towards government bonds compared to equities and other fixed income assets, which was in line with the trend across all 17 markets covered in the report.
UAE investors saw a similar amount of risk in both emerging and developed market equities: 42 per cent considered emerging market equities risky investments while 40 per cent believed developed market equities were risky.
As far as investments in commodities were concerned, 44 per cent of UAE investors viewed them as risky — a higher proportion than any other market in the Middle East and second highest among all 17 markets and regions covered by the survey.
The overall trend suggested the UAE's wealthy were cautious. "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," said Jafree.
From / Gulf News