Transcript File - Villanova IMT Dubai 2011-2012

UAE Familiarization Program – Villanova University
Institute of Management Technology
Gary Dugan, CIO
Emirates NBD Private Banking
January 2012
GCC corporate and family office share by investable assets
Corporate (Family Group)
Family Office (UHNW)
39%
24%
19%
11%
3%
1%
Market
Share
Share
(ex-sovereigns)
Contestable share
(ex-sovereigns)
Note that contestable assets are life wrappers and direct mutual or hedge funds; respondent sample split is
Corporate = 12, Family Office = 16
The influence of customer wealth on GCC investor target
returns
Target return
17.00%
15.00%
13.00%
Bahraini
Saudi
Kuwaiti
11.00%
Emirati
Omani
9.00%
Qatari
7.00%
30
40
50
60
70
80
90
Wealth Index % (GDP/ capita, GDP/capita growth)
Note that target return averages are calculated as the weighted mid-point of categories and the wealth index is
The average of GDP/capita in 2009 and 5 year GDP/capita historic growth indices, (source = IMF)
Respondent sample split is Emirati = 8, Omani = 6, Qatari = 2, Saudi = 11, Bahraini = 6, Kuwaiti = 3
Evidence to support short
time horizons amongst GCC
investors
Evidence to support short time
horizons amongst GCC investors
Do you think GCC investors have short time
horizons?
Average investor time horizons (years)
1 Yes, lack of investor experience 22%
Years
2 Yes, cultural preference 23%
6.7
3 Yes, regional instability 11%
4 Yes, client mobility 16%
5.1
5 Yes, other 11%
6 No, GCC investors don’t have short time horizons 17%
2.2
6
1
Sovereigns
5
2
4
3
Note that all respondents are included except
Sovereigns total sample = 90
Expatriate
GCC Investor
Time horizon and target return (risk appetite) for GCC expatriate
segments
Avg time horizon (years)
Avg target return (%)
11%
11%
8%
6.70%
7%
5.70%
2.80%
2.20%
Western expat
NRI
Arab expat
GCC local
Note that averages are calculated as the weighted mid-point between time horizon and target return categories
Respondent sample split is Western expat = 15, NRI = 13, Arab expat = 6, GCC = 36
Relative time horizons and target returns for GCC investor segments
Relative Target Return
High
5%
Corporate
3%
Aggressive
1%
Family Office
Balanced
Private Bank
Sovereign Agency
-2%
Retail Bank
SWF
-4%
Institutional I&B
Conservative
-6%
Low
Short
-4.0
IFA
Long
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Relative Time Horizon ( years)
Note that average s are calculated as the weighted mid-point between time horizon and target return categories and x/y axis figures are relative to
the mean time horizon and target return respectively,
Core Investment Preferences for Family Office and Corporate
Segments
5
4
3
2
1
Passive (1)
Preserve (1)
Income(1)
Funds (1)
Core (1)
Developed (1)
Active (5)
Growth (5)
Growth (5)
Securities (5)
Alternatives (5)
Emerging (5)
Corporate
Family Office
3 = neutral, 2 or 4 = slight preference, 1 or 5 = strong preference
Respondent sample split is Corporate = 12, Family office = 16
Volatility of responses on core investment preferences in
GCC institutional market
1.4
1.2
1
0.8
0.6
0.4
0.2
Passive (1)
Active (5)
Preserve (1)
Growth (5)
Income (1)
Growth (5)
Sovereigns
Funds (1)
Securities (5)
Other Institutional
Standard deviations calculated as an average of underlying segments
Core (1)
Alternative (5)
Developed (1)
Emerging (5)
Evidence to support tangible asset
allocations amongst GCC investors
Do you think GCC investors have particularly high
exposure to tangible assets?
Evidence to support asset
allocations amongst GCC investors
Average investor exposure to property
14.80%
1 Yes, lack of investor experience 16%
2 Yes, cultural preference 36%
3 Yes, historical Performance 13%
4 Yes, future prospects as an asset class 13%
9.50%
5 Yes, risk appetite 2%
7.50%
6 Yes, other 7%
7 No, GCC investors don’t have higher tangible allocations 13%
7
1
6
Sovereigns
5
Expatriate
GCC Investor
4
2
3
Note that all respondents are included
Total sample = 108; Sample split is
Sovereigns = 18
Expatriates = 34
Note that all respondents are included except
Sovereigns total sample = 90
GCC investors = 56
Home-market bias in GCC expatriate segments
Home market allocation
Home market bias
57%
55%
44%
41%
31%
31%
27%
22%
Western expat
NRI
Arab expat
GCC local
Note that home – market bias is calculated by subtracting the average investor allocation by non home-market
Investors from the home-market investor allocation
Respondent sample split is Western expat = 15, NRI = 13, Arab expat = 6, GCC = 36
The influence of internationalisation on GCC investor geographic exposure
International exposure (of
portfolio)
90%
80%
70%
Saudi
60%
Omani
50%
Kuwaiti
Qatari
40%
Bahraini
30%
Emirati
20%
10%
30
40
50
60
70
80
90
100
Internationalisation Index (%Expats, Openness of Economy)
110
120
Note that international exposure is the % of international assets in an average portfolio; the internationalization
Index is the average of the percentage of expatriates (source = Wikipedia on 20April 2011) and trade openness
(trade exports plus imports as a percentage of GDP) indices, (source = World Applied Sciences Journal 8 (7),
906-911, 2010) sample split is Emirati = 8, Omani = 6, Qatari = 2, Saudi = 11, Bahraini = 6, Kuwaiti = 3
GCC investor and expatriate allocations to all direct
investments and direct securities
Direct Investments
Direct Securities
62%
33%
11%
2%
Expatriate
Note that all respondents are included
Total sample = 108; Sample split is
Sovereigns = 18
Expatriates = 34
GCC investors = 56
GCC investor
Change in time horizons and risk appetite (total market)
Significant increase
Significant decrease
Slight increase
Slight decrease
No Change
Change in risk appetite
Change in time horizon
%
100
90
80
70
60
50
40
30
20
10
%
100
90
80
70
60
50
40
30
20
10
2012+
( Future
2010/11
( previous year )
Note that all respondents are included; total sample = 108
2012+
( Future
2010/11
( previous year )
The GCC’s Sovereign Wealth Funds
• GCC SWFs are domestic investors with substantial stakes in the utility, energy and real estate sectors
• Governments play a major role in dictating the actions of a SWF
• SWFs also stabilize government and export revenues which would otherwise mirror volatility of oil and
commodity prices
• Savings for future generations after resources are exhaust
Fund
Assets ($ bn)
Inception
Abu Dhabi Investment Authority (ADIA)
UAE
627
1976
Citi Group, Ferrari,
Oil
SAMA Foreign Holdings
KSA
473
N/A
Mainly Central Bank functions
Oil
Kuwait
296
1953
Daimler AG, Citi Group
Oil
UAE
70
2006
UAE
58
1984
UAE
27.1
2002
GE, Rosewood AD, du
Bahrain
9.1
2006
McLaren Group,
Noncommodity
Oman
8.2
1980
Libya, Bulgaria
Oil & Gas
Public Investment Fund
KSA
5.3
2008
Financing of Construction industry
Oil
RAK Investment Authority
UAE
1.2
2005
Domestic investment
Oil
Abu Dhabi Investment Council
UAE
0
2007
Al Hilal Bank, ADCB, NBAD, AD National
Chemicals Company
Oil
Kuwait Investment Authority
Investment Corporation Dubai (ICD)
International Petroleum Investment Company
(IPIC)
Mubadala Development Company
Mumtalakat Holding Company
State General Reserve Fund
Source: Sovereign Wealth Fund Institute
Notable Holdings
Origin of
Funds
Country
Emirates NBD, Emaar, DUBAL, Emirates
Group
Nova Chemicals, Ferrostaal, CEPSA,
Cosmo Oil Company
Oil
Oil
Oil
Each SWF has an investment strategy
• SWFs have undertaken substantial investments across borders
• Great majority are passive investors
• Since they have no liabilities they tend to look for long term, illiquid high yielding investments and promoting
the domestic economy
• The goal is to promote a multi-sector economy rather than oil-sector dependant
Risk Tolerance
Low
Stabilization
Gov’t Bonds
Examples
Investment Objective
Russian
Stabilization
Fund
Pension
Fund Global
Abu Dhabi
Investment
Authority
Kuwait
Investment
Authority
Tamasek
Qatar
Investment
Authority
Investment
Corporation
Dubai
Wealth
Accumulation
Source: SWF Institute, ESCP Europe, IFF
Fixed
Income
Equity
Strategic
Stake
Real Estate
High
Hedge
Funds
Private
Equity
Leverage
Buyouts
SWFs are a prominent investor class
• SWF’s are a prominent investor class with their
assets rivalling Global Hedge funds and Private
Equity combined
• Wealth for SWFs from surge in commodity
prices causing dramatic increase in current
accounts (surpluses)
• SWFs are basically government, which makes
them very political and tend to have lack of
transparency
Assets Under Management compared to peers ($ bn)
Source: Morgan Stanley SWF report (2007)
Source: SWF Institute
Conclusion
SWF’s motives are still unclear. What is clear is that after two financial crisis
they have scooped up substantial stakes across important names and
industries across the globe.
Transparency is an issue
What’s next for SWFs? Transfer of knowledge through international joint
ventures, mitigate economic downturns through usage of their wealth to spur
economic growth, enhance regional and international co-operation