The firm’s 2011 Middle East Asset Management survey, its second study of the region, was designed to analyse trends among Western expat, non-resident Indian (NRI), Arab expat, and local GCC investors.
One of the key findings of the report is the extent to which the groups favour their "home" equity markets, said Katie Saha, associate director, international third party distribution at Invesco. GCC locals displayed by far the biggest bias, typically holding GCC equity allocations of 57%, some 55 percentage points higher than those found among other investor groups.
NRI, Arab and Western expats demonstrated a similar, if less pronounced, preference for their home markets, with average overweights of 31, 27 and 22 percentage points respectively.
Several factors were behind this trend, the survey of 108 retail and institutional intermediaries revealed. Western expat respondents commonly cited a desire to mitigate currency or inflation risks, and the simplicity of investing back into home markets, while NRIs said they were attracted to Indian equities because of cultural ties and market knowledge.
Such home biases existed despite "anti-selection" factors, Saha said. These included potential tax problems for UK expats, and Middle East stock market volatility this year for Arab expats.
Overweight allocations to home markets had a knock-on impact on risk appetite. GCC locals had the most aggressive profile, with an average annual target return of 11% and a typical investment time horizon of just 2.2 years (see table below). Within this group, Qataris had the highest risk appetite, with target returns of 15-20%.
"Time horizons, for now, remain very short for GCC locals, particularly when you compare them with global benchmarks and western time-horizons – they probably only correlate to the Hong Kong Chinese," Saha said.
NRI respondents had similar expectations on returns to GCC locals, but were prepared to invest their money over a longer time-frame. Western expats were the most conservative of the four groups, with investment time horizons of 6.7 years and annual targets of just 7%.
Fieldwork for the study was conducted by NMG Consulting, and results were based on face-to-face interviews with intermediaries across the GCC. There were 70 retail interviews, among distributor-facing strategists at private banks, retail banks and IFAs.
| Western expats | NRIs | Arab expats | GCC locals | |
|---|---|---|---|---|
| Time horizon | 6-7 years | 5-6 years | 2-3 years | 2 years |
| Target return | 7% | 11% | 8% | 11% |
| Risk profile | Conservative | Balanced | Balanced | Aggressive |
Source: Invesco
