DUBAI– 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, one of the largest asset management companies in the world. A vast majority (70%) 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%) who say the same. Indeed, asset growth is increasingly becoming a priority over simply protecting principal (83% versus 67% globally).
More than five years on from the financial crisis, the scars still remain, particularly in Europe where 71% of respondents (2013: 68%) want to take as little risk as possible, even if it means they have to sacrifice returns; globally, the number stood at 66%. The mood is better in the US, with 53% 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.
“Many individual investors have set aggressive investment targets, but don’t have a realistic way of reaching them,” said John Hailer, chief executive officer 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.”
Performance is personal
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%) cited meeting their savings targets as a key benchmark, rather than overall market returns (22%). Sixty-two per cent said they would be happy to achieve their investment goals over a year even if they underperformed the market, 64% are willing to set a target return that is independent of overall market returns, and 69% 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,” said Moad Touhami, 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.”
Financial advisors playing a vital role
More than two-thirds (69%) of Gulf-based individual investors believe that traditional methods of portfolio construction no longer provide the best way to pursue returns. Just 20% 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,” said 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.”
Indeed, a large number of Gulf-based individual investors are seeking professional help in managing and growing their portfolios. A full 67% of Gulf-based individual investors use the services of an investment advisor at least occasionally, higher than the global average of 63%. The percentage of investors discussing risk with their advisors more than before grew significantly (77% vs. 55% last year) as did the percentage revealing their needs and expectations more than before (76% vs. 47% 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,” said 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.”
Natixis Global Asset Management’s 2014 survey of 250 Gulf-based individual investors in UAE, Qatar and Kuwait was conducted by CoreData and is part of a larger global study of 5,950 investors in 16 countries from Asia, Europe, the Americas and the Middle East. The study looks at investor attitudes towards portfolio construction, risk, advice, saving, investing and the markets. Investors were surveyed online in March 2014 and were required to have a minimum net worth of US$200,000 (or PPP Purchase Price Parity equivalent) of invested assets