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Gulf investors shy away from long-term deals.

Dubai Gulf Cooperation Council investors are highly risk averse and have relatively short time horizons for investments made in 2011, according to the newly-released Invesco Middle East Asset Management Study, a survey of investors conducted by Invesco, an investment bank and NMG, an independent strategy consultant.

"Regional instability in 2011 is one of the major contributors to short investment time horizons and high risk-aversion among investors. But we expect a big change next year as stability returns to the region," said Nick Tolchard, head of Invesco Middle East.

The Invesco study analyses the attitudes and behaviour of institutional and retail investors in the GCC.

The survey this year showed that 69 per cent of Gulf-based investors have investment time horizons of less than five years for investments made in 2011, while less than one third (31 per cent) of respondents have a horizon just beyond five years.

However, the study said short-termism is in itself a short-term issue, with nearly 18 per cent of all investors indicating they intend to lengthen their investment time horizons in 2012.


"The lengthening of time horizons for the region's investor community in the next year indicates GCC investor sentiment is becoming increasingly confident and optimistic moving into 2012," said Tolchard.

GCC investors have shied away from risk in 2011 with more than 27 per cent actually decreasing their risk exposure, with 32 per cent of institutional investors either decreasing their risk exposure on funds slightly or significantly and a quarter of retail investors doing so.

Predictions by the same investors, however, show that this pattern is set to reverse next year, with 22 per cent of all investors set to increase their risk exposure in their funds.

"The broadening and strengthening of time horizons suggests that 2011 may be a real point of inflexion in the region, a shift to a more positive outlook as markets are expected stabilise amid global financial recovery, and investor confidence slowly returning," said Tolchard.

Institutional investors in the region have been averse to equity investments with only about 10 per cent investing in global equities while 40 per cent of retail investors preferred equity investments.


In contrast, institutional investors are seen spreading their risk across a much broader range of asset classes with about 10 per cent of investment in private equity and about 32 per cent in local/regional equities.

Despite the slump in the property sector, property continues to be an important component of portfolios.

"Property is clearly an important asset class for both institutional and individual investors. We think the trend has a lot to do with the lack alternative asset classes in the region," he said.

"But from the investor responses we can gauge that more investors are inclined to invest in global equities next year."

Dubai A new study by Invesco Asset Management unveiled yesterday debunked the long held argument that investments made by sovereign wealth funds (SWFs) from the region are politically motivated.

"The new model helps dispel the myth about the prevalence of international EoACAytrophy asset' investing, and suggests geo-political drivers could be drawing money flows towards local development," said Nick Tolchard, head of Invesco Middle East.

The study estimates that currently SWFs in the GCC account for 44 per cent of global SWF flows totalling $1 trillion (Dh3.7 trillion).

It also reveals that contrary to the widely held view that the majority of SWF assets in the GCC region put money into what is termed EoACAypolicy supporting' investments; either trophy assets to build the profile of a region or investments to support foreign policy, this accounts for approximately just 5 per cent of SWF assets.

"From our close interaction with regional sovereign wealth funds we have observed that about 88 per cent of GCC SWF assets are invested internationally for diversification purposes while only a fraction, about 5 per cent, is invested to drive foreign or local policy outcomes," said Tolchard.

In the wake of the recent political turmoil in the region, the study observed that more SWF money is being invested locally to address local development needs.

"On the surface this would seem to make sense as a means to placate rising unrest, but in some markets such as Qatar there are possible local inflationary pressures to consider as the local pool of capital increases - though this will not be the case everywhere," he said.

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Publication:Gulf News (United Arab Emirates)
Geographic Code:70MID
Date:May 24, 2011
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