In this latest wide ranging and detailed 2013 study Invesco revealed that over the last year there were also significant changes among Arab expats and non-resident Indians (NRIs).
For the NRIs, the average time horizon jumped from 3.5 years in 2012 to 5.9 years and the home market bias in terms of the percentage of new assets year-on-year fell from 37% to 24%.
The study states that “in contrast to Arab expatriates, the increase in time horizon for NRIs is not driven by changes to their length of stay in the GCC. In fact the primary driver of increasing time horizons is changes in the attractiveness of investment opportunities in India versus the GCC.
Invesco last year observed that the combination of exchange rates, deposit rates and regulation encouraged NRI investors to put more cash on deposit in India.
“Homemarket bias has reversed this year, reducing by 13% as the rupee has fallen against the dollar/dirham, and NRIs have invested more in dollar-denominated products in the GCC than in rupee-based deposits in India,” the study says.
Supporting evidence for this change NRI allocations to cash have fallen from 20% to 9% while allocations to life insurance products have increased from 42% to 52%.
“Life insurance savings products are contractual products which are more illiquid than cash, so a shift to life products is consistent with the year-on-year increase in NRI time horizons,” the study explains.
Invesco further highlights that increasing time horizons are important for the asset management community because clients who invest for longer periods typically take more risk and increase their exposure to higher risk assets.
Despite a recent influx of Arab expatriates following the Arab Spring, who “you would expect to be transient by nature, only 11% plan to leave the GCC within two years. Most distributors highlighted that perceptions have recently changed and a larger percentage of Arab expatriates now expect to remain in the GCC (55% plan to stay for more than five years).”
A higher proportion of both NRIs, 78%, and western expats, 59%, expect to stay more than five years.
“For NRIs the main reason for leaving the GCC is redundancy (loss of job) while for Arab expatriates the most commonly cited reason is a change in family (or personal) circumstances. The job market has been relatively stable over the last 12 months and, as a result, there has been limited change in length of stay for NRIs. In contrast, the ongoing unrest in MENA continues to impact personal circumstances for Arab expatriates and as a result, respondents cited changes in length of stay.”
Another key finding in the study was that just under half (43%) of private capital flow entering the UAE is from emerging markets including 15% from India, 10% from Russia, and 7% from China.
Just 13% of private capital is flowing in from across all developed markets including the UK, continental Europe and North America.
Nick Tolchard, head of Invesco Middle East said: “Our 2013 study provides a strong indication of a structural shift in the UAE’s fortunes. It seems to be showing signs of developing a leading position as a regional hub between Europe and Asia.”
