Dubai: Majority of the investors in the UAE have raised their expectations marginally in terms of returns even as they become more aware of the risks and consider oil prices as the biggest threat to their investments, a survey has revealed.

A study conducted by asset manager Old Mutual International and Quilter Cheviot, an investment management services firm, found out that UAE investors now expect to receive average investment returns of 7.3 per cent in 2016, marginally more than the expected 7.2 per cent in 2015.

“Despite lower than expected investment returns in 2015, investors remain optimistic with only one in three investors saying they have lowered their expectations of investment returns,” said Mark Leale, Head Of Quilter Cheviot’s Dubai representative office, and principal representative. This is despite investors only receiving an average return of 4.7 per cent in 2015.

Investors who lowered expectations were the ones who received poor returns in 2015. About 14 per cent of the respondents who lost money in 2015 and got negative returns, while investors who had not lowered expectations lost just 3 per cent in 2015, and got an average return of 5.3 per cent last year.

However, only one in three investors based in the UAE have lowered their expectations of investment returns in the last 12 months. The main reason stated for this was due to the current macroeconomic conditions preventing them from attaining better investment returns. However, only 7 per cent investors thought their expectations were too unrealistic.

Risks:

At the same time, they are fully aware of the risks, with nine out of 10 investors are more aware of the risks than they were a year ago. More than half thought that low oil prices was the biggest investment risk in 2016, while other 43 per cent believe economic stagnation in the world economy, while other 32 per cent says local economic and political turmoil was the third biggest risk.

Among nationalities too, there was a large discrepancy between understanding, attitudes and engagement of investors with UK expats among the most risk averse, and UAE nationals the biggest risk takers.

“Understanding a client’s risk profile is imperative and can help when building a suitable investment portfolio. By ensuring investments are matched to their

client’s risk level, advisers will help limit the client’s exposure to market movements when aligning to levels within their comfort zone,” Brendan Dolan and Mark Leale of Old Mutual and Quilter Cheviot respectively said in a report.

Engaged

The study also showed that investors are engaged when it comes to their finances and their expectations are high.

“We expect to see this level of investor understanding grow further and that this will result in an increase in the number of financial advisers utilising

outsourced investment solutions to provide their clients with the returns they are looking for,” Dolan and Leale said.

Non-resident Indians were the most informed on their investment portfolio, with 92 per cent reviewing their investments periodically. This compares with 66 per cent for other expats and 29 per cent for GCC nationals.

 

Methodology:

The investment research took place in May 2016. It was a targeted piece of research, aimed specifically at investors based in the UAE (mainly Dubai and Abu Dhabi) who used the services of a professional to invest in the stock market.

The sample size of the research was 130 respondents from various nationalities like expats from the UK, Europe, North America, India and also included the GCC nationals.

In total, just under half the respondents had between $50,000 and $250,000 to invest and just over half had more than $250,000 to invest. 8 per cent of respondents had over $1 million invested.