Emirates Investment Bank (EIBank), an independent private bank based in the UAE, has published the 2018 edition of its annual GCC Wealth Insight Report (the Report).
The Report provides intelligence on the collective economic and investment outlook of High Net-Worth Individuals (HNWIs) from across the GCC and the main elements that drive their investment decisions.
For the purposes of this study, HNWIs are defined as individuals with $2 million or more in investable assets. Interviews for this year’s survey were conducted between October and December 2017.
Increased economic optimism amongst HNWIs in the GCC is the overriding theme of the 2018 Report, with almost two thirds of HNWIs believing the current global and regional economy is improving or staying the same, attributing their optimism to the perceived recovery from previous economic crises and increased political stability. HNWIs in the GCC also expect the positive global and regional economic trajectory to continue over the next five years.
Positive economic sentiment in the GCC region has coincided with an uptick in preference for keeping assets closer to home and investing in GCC assets. Confidence in the GCC’s economic stability, together with the recognition of external risks, has prompted GCC HNWIs to mitigate risk and increase their exposure to regional markets.
This confidence in the regional economy is evident in HNWIs’ strong endorsement for the GCC, and the UAE in particular, as an attractive wealth management location for HNWIs from the region and from the rest of the world. They point to the UAE’s tax efficient system and sustainable economic model as the main reasons they choose the UAE as a wealth management destination.
Alongside the optimism and positive outlook seen in this year’s survey, the 2018 Report indicates that HNWIs are still somewhat cautious about the uncertainty in the economic and political environments. This is evident in the increase in HNWIs concerned with preserving wealth, as over a third said their priority now is to preserve wealth rather than pursuing a strategy of growing wealth, a notable increase from 2017. The percentage of those focused on growing their wealth has dropped to less than two thirds of respondents, bringing wealth accumulation to a five-year low.
The distribution of HNWIs’ wealth is broadly like previous years, with investing in their own business remaining the top choice. However, there does appear to be an uptick in allocation to real estate and a slight shift away from cash in comparison to last year.
The majority of HNWIs based in the UAE manage their assets at home and nearly three quarters of GCC HNWIs rate the UAE as a top destination for wealth management in the region. Over the past three years a growing number of HNWIs have opted to keep their assets closer to home, which has also underwritten the evolution of the UAE’s regional wealth management hub status.
More than half of HNWIs say that the geopolitical situation in the Arab region has changed their approach to investing. Other than regional geopolitics, oil prices, economic reforms and the introduction of VAT have had the most impact on investment decisions over the past year.
In the near future, half of HNWIs say that they plan to increase their investment in their own business and in cash, whilst the same amount, also plan to increase their investment in real estate. HNWIs are more likely to decrease their investments in cryptocurrency and bonds than any other asset class. Meanwhile, three quarters of HNWIs believe they are well positioned in the equity markets.
Those who prefer a global investment portfolio has dipped to below a quarter, the second lowest reading over the last five years. For those global investors, the desire for diversification and risk management continues to be the driving force. In terms of geographical preferences, there has been a shift towards emerging markets both currently and in the future. HNWIs with a global investment portfolio are looking to invest more in China, India and Brazil over the next three to five years.