Risk appetite increasing among Gulf investors
Doha, May 12, 2014
Gulf-based individual investors surveyed in the UAE, Qatar and Kuwait ranked as the world’s most risk tolerant investor group, according to a global survey published by Natixis Global Asset Management.
A vast majority (70 per cent) of Gulf-based respondents are more willing to endure higher levels of risk now than they could a few years ago, in contrast to less than half of global investors (49.7 per cent), stated the top asset management company in its survey.
Indeed, asset growth is increasingly becoming a priority over simply protecting principal (83 per cent versus 67 per cent globally), it added.
More than five years on from the financial crisis, the scars still remain, particularly in Europe where 71 per cent of respondents (68 per cent in 2013) want to take as little risk as possible, even if it means they have to sacrifice returns; globally, the number stood at 66 per cent.
The mood is better in the US, with 53 per cent of respondents willing only to assume minimal risk. Progress is evident, but it is not happening at a velocity that creates exposure to the additional risk necessary to meet retirement objectives, said the report.
“Many individual investors have set aggressive investment targets, but don't have a realistic way of reaching them,” remarked John Hailer, the CEO of Natixis Global Asset Management in the Americas and Asia.
"Something has to change. The markets have reached new heights and investors feel generally comfortable about portfolio performance. But without a plan that incorporates individual risk and personal benchmarks, the odds are diminished that investors will meet their goals, and that is the greatest risk of all," he added.
The Natixis Global Asset Management survey showed that, for many individual investors around the world, including the Gulf region, performance is being measured in more personal terms.
When it comes to measuring success, nearly twice as many Gulf-based individual investors (40 per cent) cited meeting their savings targets as a key benchmark, rather than overall market returns (22 per cent).
Sixty-two per cent said they would be happy to achieve their investment goals over a year even if they underperformed the market, 64 per cent are willing to set a target return that is independent of overall market returns, and 69 per cent worry more about the risk of not achieving their investment goals than the risk of not beating the benchmark.
“What we found was that individual investors are more focused on meeting their long-term goals than beating short-term market movements,” remarked Moad Touhami, the director and head of Mena Distribution.
“Performance is personal and it’s up to asset managers to provide the type of solutions and support that fit the individual needs of investors and their advisors,” he added.
More than two-thirds (69 per cent) of Gulf-based individual investors believe that traditional methods of portfolio construction no longer provide the best way to pursue returns. Just 20 per cent said they were very confident their current investment approach will protect their portfolio from dramatic swings in value.
“Individual investors need to look at new ways of utilising traditional assets within the larger context of their investment portfolios to achieve growth, improve diversification and stay on track to meet their investment targets,” stated Touhami.
“This is where financial advisors can help bridge the gap. As a whole, investors who call on the services of a financial advisor tend to have clearer investment objectives, a strategy for meeting them, more robust investment knowledge and a better understanding of risk,” he added.
According to the survey, a large number of Gulf-based individual investors are seeking professional help in managing and growing their portfolios. A full 67 per cent of GCC investors use the services of an investment advisor at least occasionally, higher than the global average of 63 per cent, the survey found.
The percentage of investors discussing risk with their advisors more than before grew significantly (77 per cent vs. 55 per cent last year) as did the percentage revealing their needs and expectations more than before (76 per cent vs. 47 per cent last year).
“Yet while Gulf-based individual investors are willing to assume more risk and be more open to new investment solutions, this general bullishness is not always translating into more diversified portfolios in line with their investment objectives,” observed Touhami.
“The needs and expectations of individual investors have changed and now more than ever dynamic asset allocation is extremely important. We believe that investors can achieve robust returns and manage risk effectively at the same time. But to do so, they need more durable, diversified offerings and the benefit of professional advice,” he added.-TradeArabia News Service