ME firms 'employing new investment strategies'
Dubai, June 10, 2013
Institutional investors in the Middle East are growing more aware of the need to employ new investment strategies and techniques to generate positive returns in a highly volatile market environment, according to a new study.
A risk-free, return-free environment is key concern for Middle East investors, said the study by the Durable Portfolio Construction Research Center of Natixis Global Asset Management (NGAM), one of the 15 largest asset managers in the world.
The Middle Eastern survey findings are part of an annual global survey conducted by the company to measure institutional investment sentiment, said the company headquartered in Paris and Boston.
“The study shows an acknowledgement by institutional investors that the old rules of investing no longer apply and confirms the need for new investment strategies to address the unique challenges of modern markets,” remarked Jamal Saab, the managing director and head of Mena & CEA at Natixis Global Asset Management.
Ninety-two per cent of institutional investors surveyed are more confident than they were a year ago about how they manage risk, but eighty-five per cent still say that managing market volatility and associated risks remain their top concern, the survey revealed.
Eighty-two per cent believe that traditional assets are too highly correlated to provide distinctive sources of return and nine in ten institutional investors firmly believe that Middle Eastern investors need to replace traditional diversification with new techniques, in order to achieve results.
“At NGAM, we have developed a better model, Durable Portfolio Construction, which contains a clear direction and structure for using new strategies and techniques. We want our clients to build portfolios that will indeed stand the test of time and help clients meet their goals in high volatility, high risk environments,” continued Saab.
Despite the difficulties, most institutional investors remain upbeat about their ability to meet their long-term investment goals, but hold reservations about those of the average citizen, said the survey.
While eighty-four per cent of Middle Eastern institutional investors said that they will meet their own liabilities, only 59 per cent believe the average citizen in their country will have enough assets to meet their financial obligations when they retire, meaning sentiment remains that much of the population might struggle in their later years, it stated.
According to the NGAM study, institutional investor sentiment about retirement also differs significantly from country to country.
"Expectations are brighter in the UAE and Qatar where 83 per cent and 64 per cent, respectively, of institutional investors believe the average citizen will have enough assets to meet their financial obligations in retirement, whereas in Kuwait, only 22 per cent of investors expressed the same confidence," revealed Saab.
“These findings tie in with what we are seeing globally. With the economic downturn taking a major toll on retirement savings, citizens may now be required to pick up a bigger share of their retirement costs, with some no longer being able to rely solely on government support in later life,” he added.
Institutional investors are responding by turning towards global equities and alternatives.
Sixty-nine per cent say they will add to their holdings of alternatives and other uncorrelated asset classes over the remainder of the year, and 93 per cent predict alternatives will perform better this year than in 2012.
The NGAM study pointed out that the brick and mortar investments topped the list with 57 per cent of institutional investors planning to add to their real estate holdings and 40 per cent increasing allocations to infrastructure-related investments.
About 67 per cent plan to allocate more to private equity, it said.
Almost half (45 per cent) of Middle East investors agree that global equities will be the top-performing asset class in 2013, followed by private equity (26 per cent). As a result, three in four (76 per cent) plan to increase their allocations to global equities and 41 per cent plan to increase their exposure to emerging market equities.
“Institutions are mindful that they need to meet both short- and long-term objectives, and they see stocks as the best way to achieve that balance in 2013,” said Saab.
The 'Natixis Global Institutional Research 2013' study is based on fieldwork conducted in 19 countries and across six geographical regions.-TradeArabia News Service