A new market survey has revealed that large institutional investors in the Middle East are showing a greater appetite for alternative investments, such as private equity and hedge funds.
The survey, by asset management arm of French bank Natixis shows that there has been a paradigm shift in the investment pattern of Middle East investors. Traditionally, these investors had preferred to invest in conservative products, such as government bonds and index-replicating funds. However, these alternative investments are being favored to generate competitive returns in fluctuating global markets.
Jamal Saab; “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.” — Jamal Saab, managing director and regional head at Natixis Global Asset Management
Interest in these investments has encouraged some of the world’s largest sovereign wealth funds to set up offices in the Gulf region. About 69 percent of the polled Middle Eastern institutional investors expected to increase fund allocations to alternatives and other assets not related to the global market trends. Sovereign funds, like the Abu Dhabi Investment Authority, prefer to invest in private equity funds as they try to balance short and long-term investment objectives.
Ninety-three percent of respondents predicted that alternative investments would perform better in 2013. About 59 percent of institutional investors in the region also opine that citizens in their country will have enough assets to address their liabilities upon retirement. On the brighter side, 84 percent of the respondents were optimistic of meeting their own long-term liabilities.
Another recent report by U.S.-based asset manager Invesco highlighted that sovereign wealth funds in Gulf, worth USD 1.8 trillion, were now allocating up to one-third of their new investments to private equity. This allocation was higher than the funds dedicated to property and infrastructure investments.