New research has uncovered the changing attitudes of investors based in the UAE, highlighting the impact the oil slump and volatile markets is having on their behaviors.
The report, carried out by leading financial solutions provider, Old Mutual International, and Investment Management firm, Quilter Cheviot, revealed the oil slump and other recent market volatility has led to investors having an increased awareness of risk and a far greater understanding of where their money is invested.
However, the study also revealed that only roughly half of the investors surveyed see the oil price as the main concern and although most received a lower return than expected in 2015 they do not expect that to be the case this year, suggesting a very optimistic view of their investment portfolios for 2016.
The investment research was aimed specifically at investors living in the UAE who have a minimum of US$50,000 invested and use the services of a professional, such as a financial adviser or investment manager, to invest in the stock market.
The firms, which both have offices in the DIFC (Dubai International Financial Centre), carried out the research to capture and understand the extent of the changing investor market in the UAE and more specifically to understand if investors are fully informed as to what their money is invested in and if it is matching their expectations.
Nine out of ten investors surveyed say they have become more risk aware in the last 12 months and 64% of respondents said they now have a good or strong understanding of risk,
which is a clear indication that investors are becoming more knowledgeable and more market aware. This increased understanding and awareness of risk is also directly affecting their appetite for it in their portfolios. 89% recognize the importance of matching investments to their individual appetite for risk. Further to this, more investors believed protecting against loss to be more important than making gains - 87% rating protecting against loss as important or very important compared to 82% who rated investment gains as important or very important. The investors surveyed had a disappointing year in 2015 with an average return of just 3.5%. However, they remain optimistic with only one in three saying they have lowered their expectations of investment returns. 42% of respondents remain extremely bullish, expecting to receive over 8% return in 2016. Brendan Dolan, Regional Director for Old Mutual International, Middle East and Africa said: “Attitudes of investors based in the UAE are changing. The increased volatility in global markets and a fluctuating oil price has directly affected attitudes and habits, with investors now having an increased level of understanding of investment risk and more specific requirements than ever. “This volatility and deeper understanding of long-term investments has resulted in a more informed approach to risk and reward that has seen many investors adopting more conservative approaches to their portfolios, with many investors focusing on protection against loss rather than growth.
“However, performance expectations still remain high among investors, suggesting that many see the current market situation as an opportunity rather than a threat.” The oil price remaining low is seen by the majority (55%) as the biggest risk to investments, however, this means almost half of the respondents (45%) believe this not to be the case. Stagnation in the world economy was identified as the second biggest risk while local economic or political turmoil was the third greatest concern. Mark Leale, Head of Quilter Cheviot’s Dubai Representative Office, said: “It has long been the understanding in behavioral finance that investors suffer from loss-aversion - disliking losses more than they like equivalent gains. “This research supports that theory, with investors generally placing greater importance on protection against losses than on investment gains. Whatever their risk levels, investors now have a far greater understanding of their investment portfolios and overwhelmingly agree that it is important that these match their individual level of risk. “We have seen ‘risk-targeted’ investment solutions – which ensure risk is actively managed on an ongoing basis - growing in popularity in recent years. While the concept of risk-targeting is still in its infancy in the UAE, we are seeing demand for such solutions rise in line with their deeper understanding and their increasing focus on managing risk in the face of mounting volatility.”
MARK LEALE & BRENDAN DOLAN
About Old Mutual International Old Mutual International, part of Old Mutual Wealth, is a leading provider of financial solutions designed for both expatriate and local investors across the world, including Africa, Asia, Europe, Latin America and the Middle East. Our products and solutions are underpinned by a wide choice of investments and ways to monitor and manage them online, with the help of a financial adviser.
About Quilter Cheviot Quilter Cheviot, part of Old Mutual Wealth, is a leading investment management company which can trace its heritage back to 1771. The UK based firm has recently opened a representative office in the Dubai International Financial Centre (DIFC). Quilter Cheviot has built a strong reputation over several hundred years as a respected firm of investment managers. Quilter Cheviot focuses on structuring and managing bespoke portfolios for private clients, professional intermediaries, charities, trusts and pension funds. Throughout our history, our standards and values have remained consistent. Our impartial approach, high standards in personal service, drive to build and preserve the wealth of our clients and belief in the importance of a robust investment and underlying processes have remained unchanged. The firm is based in thirteen locations across the UK, Jersey, Ireland and Dubai.