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Global Wealth Management

Global Wealth Management

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Published by Sindhu Nair

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Published by: Sindhu Nair on Aug 01, 2011
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Qatar today
 
july 2011
20
BaNk NotEStag thIS
Saudi arabia,
 Kuwait, Qatar and UAE emerged as ouro the top ten countries in the worldwith the highest density o ultra-wealthyhouseholds. The ndings appear inBCG’s eleventh annual Global Wealthreport titled Shaping a New Tomorrow:How to Capitalise on the Momentumo Change, which was released recentlyin the Middle East. Another interesting actor that was re- vealed in the report was the lack o a properbusiness model or wealth managers andprivate banks to ocus on these high networth individuals (HNWI).“Local wealth managers are currentlyorientating their wealth management o-erings towards the mass auent segment,but are missing out on the high net worthsegment. Local Qatari banks should con-sider building business models – with therequired skills, products, services – to beable to address these clients,” says DouglasBeal, Managing Director BCG Middle East.
Qatar Today
tries to nd out whatis lacking in the wealth managementdomain and also gets insights rom expertson global investment trends.
High on wealth
 Low on risk
 According to the study, ultra-high-net-worth (UHNW) households, dened asthose with more than $100 million in As-sets under Management (AuM), were mosthighly concentrated in Saudi Arabia regis-tering 18 per 100,000 households. This wasollowed by Switzerland (10), Hong Kong(9), Kuwait (8), Austria (8), Norway (7), Qa-tar (6), Denmark (5), Singapore (5) and theUAE (5).Making it to the top ten list in terms o thehighest proportion o millionaire house-holds were Qatar–8.9% , Kuwait–8.5% andUAE–2.6%. Singapore and Switzerland arethe highest with Qatar taking the third po-sition.Positive trends also emerged orMiddle East and Arica overall, as AuMrose by 8.6% to hit $4.5 trillion in 2010 andwith expectations to reach $6.7 trillionby 2015.This was not the least surprising saysBeal. “Given the demographics and overallwealth o these petroleum-rich countrieswe would expect a higher proportion o UHNW households than in other parts o the world. Growth in AuM also reects thestrong undamentals o the region, drivenby continuing strong petroleum prices.”“Nevertheless, the risk appetite o re-gional investors remains low, especiallywhen compared to levels seen beore thedownturn. The asset allocation o GCChigh net worth individuals remains over-weight in cash and capital-protectedproducts.”“During these times the global marketsoscillate rapidly between risk taking andrisk aversion, reected not only in thedemand and supply, and thus valuationo certain asset classes, but also in capitalows,” says Heinrich Weber, Head GenevaBranch and Desk-head Private BankingMiddle East, Falcon Private Bank Ltd, aSwiss private bank specialised in wealthmanagement or private clients, wealthyamilies and institutional investors.“During such periods wealth will be de-
Global Wealth ManaGeMent:
an opportunity unexplored
Bysindhu nair
EvEN aS World markEtS gEt lESS FrIENdly, coNFlIctS mark thE rEgIoN aNd INvEStorS rEmaINovEr-cautIouS thE WEalthy gEt WEalthIEr. gloBally, WEalth clImBEd to a rEcord Qr443.35trIllIoN ($121.8 trIllIoN), aBout Qr72.8 trIllIoN ($20 trIllIoN) aBovE WhErE It Stood tWo yEarSago durINg thE dEpthS oF thE FINaNcIal crISIS accordINg to thE rEcENt rEport By BoStoNcoNSultINg group (Bcg).
 
 
july 2011
Qatar today
21
BaNk NotEStag thIS
stroyed, and other wealth created. Shitsin power take place. The global marketswill uctuate strongly until many o the regional and economic conicts aresolved and clearer visibility o economicgrowth, ination and monetary policies isattained.”“I would like to say that Qatar has ahighly intelligent leadership who has builtover the last two decades a pole o stability;a strategy, which shows its strengths ex-actly in times o tension. Thereore Qatarhas done well so ar and will also do wellin the long run. This is also evident com-paring the chart o the Qatar ExchangeIndex with other stock indices, regionaland global. Even though, you would haveto actor out econometric comparisons incertain correlation eects, I see no reasonwhy Qatar’s stability would deteriorate inthe oreseeable uture. Thus, investing inQatar is a very good long-term choice,”opinions Weber.“Such a market is obviously attractiveor private banks and wealth managers,”he adds. Akshay Randeva, Director, StrategicDevelopment at QFCA reects the samesentiments o others when he says thatHNWI need not look beyond the localmarkets when the GDP rates here are sopromising. (See more on his views in ourInsurance Special on Pg 24 )But Guy Monson, Chie InvestmentOfcer and Managing Partner at BankSarasin Alpen, has an entirely reshperspective.He says wealthy Qataris have been hap-py to buy high yields in stocks in the localmarket but they have been araid becauseo all the problems in the global stockmarket to buy global equity stocks. Hesays it’s time to change and go back to theold-ashioned investment method. (Forhis insights read interview on Pg 20)
World markets and trends
 World markets have also become lessriendly or Middle Eastern investors asUS regulators have increased scrutinyover all transactions in and out o the USmarkets. The higher demands o US su-pervision are considered to be intrusiveor HNWIs who seek privacy and havedecided to invest locally. These changesin regulatory stature in Western marketshave altered the market dynamics o theregion creating new opportunities orwealth managers in the country or o theregion. Weber says, “Ater 9/11 all sorts o con-trols were increased. Additional actors,which inuence the decrease in riendli-ness, are certainly misunderstandings be-tween the US and the ME and also the de-sire to control inormation. Unortunately,I can only see that the trend to monitor andcontrol capital ows in and out o the USincreasing.”Monson eels dierently. He eels thatthe regional unrest gives Qatari investorseven more reason to go global or a greaterexposure to international markets.The BCG report also had an interest-ing nding about oshore wealth, de-ned as wealth accumulated in a countrywhere the investor has no legal residenceor tax domicile, which echoed similarsentiments. According to the report the amount o oshore wealth, increased to $7.8 trillionin 2010 up rom $7.5 trillion in 2009. Butthe proportion o oshore wealth slippedto 6.4% in 2010 rom 6.9% in 2009.This was a result o strong asset growthin countries where oshore wealth isless popular, like China, as well as strin-gent regulations in North America andEurope which prompted clients to movetheir wealth back onshore, thus loweringthe net increase in oshore assets saidthe report.The Middle East presents a unique seto challenges or wealth managers. Prod-ucts are not particularly innovative yet,although banks in the region are doingtheir best to cater or their customers.BCG report puts the picture in per-spective. It says that though Swiss systemis well positioned to capture the wealthrom ME and Arica and also Latin Amer-ica owing to its long-standing reputation,as an o-shore centre it is under immensepressure. This is because about hal o its AuM comes rom Western Europe thatis increasing its watch o cross-borderbanking.
Follow the rules
 What then is the right model or the wealthmanagers or existing banks to gain accessto these HNWI? Weber eels that a global wealth man-ager has to study the Qatari market veryclosely.
“WEalth maNagErS Should FIrSt FocuS oN dEvElopINg thE rIght SErvIcE modEl.thIS Would INcludE ExpErIENcEd aNd SkIllEd rElatIoNShIp maNagErS, Who WouldtEam up WIth WEalth plaNNErS aNd INvEStmENt advISorS to SErvE thEIr clIENtS.”
Douglas Beal,
managing DirECtor,bCg
“plan tHrougH”
tHE bEst aDviCE rEgarDing invEst-mEnts is to makE a plan, says wEbEr.“anD to tHink EvErytHing tHrougH,from a to Z. ask yoursElf: Do i nEEDliQuiDity, How muCH anD wHEn? Do iHavE tHE nErvEs to HolD a positiontHrougH nEgativE tErritory? arEmy assEts EnougH DivErsifiED? HowmuCH risk am i willing to takE? Doi want to DElEgatE my invEstmEntDECisions or not? How is my familyor my otHEr businEss CorrElatEDwitH your portfolio? How soliD ismy bank?”
 
Qatar today
 
july 2011
22
uy Monson, Chie Invest-ment Ofcer and Man-aging Partner at BankSarasin Alpen is no rookie. With an experience o over 27 years with the Bank, he is an in- vestment expert managing close to $20billion o ‘primarily’ global equities whichhe looks ater or oundations, charities,institutions and individuals. He was inthe country to tell Qatari investors o theopportunities that are available in globalequity incomes.The classic blue-chips which used tobe called the ‘Nity-Fity’ o the 70s oera unique combination o unprecedentedbalance sheet strength and liquid assets,according to Monson.“The liquid assets or the average big American companies is the highest in50 years today, making this global largecap equity, the best bet ever or anyinvestor,” he says.“American companies have never hadmore cash; they have $2.5 trillion o liquidassets. At the same time, the prot mar-gins o these companies ater the disastero the Lehman years have rebounded tothe highest levels ever recorded.”Now at the moment, Qatari investorsare looking or yield in local corporatebonds, to an extent in cash deposits, andalso to the local Qatari equity markets asthe yield there is quite high.In this scenario, Monson wants his in- vestors to look at another opportunitythat is not to be missed which is the globallarge-cap equities.“There has been a ood o money intotwo special income sources, one is highyield bonds and second in the emergingmarket debt unds. I think it is time nowto look at the risks,particularly in thebond market. Every-where you look in theworld, governmentbonds are not evenprotecting you romthe ination. But orthe global equity com-panies, the dividendsare rising aster thanincome. The dividendsrom IBM have grown25% every year or thelast ve years, or Wal-Mart it has grown 16%,or pharmaceutical gi-ant Novartis it is 13%,Intel, 12% (every year).These growth ratesare aster than ina-tion. When you buy abond, the yield is xedbut when you buy eq-uity you get dividendgrowth.”“I am here to advicethat this is a ‘modernclassic style’ o invest-ment which is sae. I think we now havea global ‘Nity-Fity’ with companies not just rom US.”But having said that the Nity-Fitycompanies are global, Monson observesthat most companies are rom the Westnot the East. He talks about the risingination in the rest o the world whichmakes them less attractive.“While the growth rates o companiesin Brazil, India and China are exciting;their companies are not cheap anymore.They are acing rising labour costs, risingood and energy costs, rising currencies. Also the corporate governance there isnot too good.”There is never a better opportunityor cautious Qatari investors to buy intosome o the best companies o the world,some old and boring assets like consumer,healthcare, telecoms and old currencies,he says.“It has never been cheaper to buy thebest.” And a lesson he has learnt rom hisover two decade long stint in the invest-ment market, “Better to be early thanlate....”
guy moNSoN rEcommENdS that INvEStorS takE a Back to FuNdamENtalS approach aNd takE thEclaSSIcS INvEStmENt valuES oF caSh FloW, dIvIdENd aNd BalaNcE ShEEt StrENgthS.
eye thenifty-fiftieS aGain
 Nity Fity was an inormal term used to reer to 50 popular and the largest international cap stocks on the NYSE in the 60s and 70s that were widely regarded as solid buy and hold growth stocks.The fty are credited with propelling the market o the early 70s. Most are still solid perormers, though some o them are deunct now.
BaNk NotES
g

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