Gulf investors willing to endure higher risk levels

13 May 2014

Less than six years after the financial crisis, investors’ risk appetite has returned

Individual investors in the UAE, Qatar and Kuwait are ranked as the world’s most risk-tolerant investor group, according to a global survey published by Natixis Global Asset Management.

Out of 250 Gulf-based investors, 70 per cent are said to be more willing to endure higher levels of risk now than they could a few years ago, in contrast to less than half of global investors (49.7 per cent) who said the same.

Western investors remain cautious, with 71 per cent of European respondents indicating that they want to take as little risk as possible. In the US, 53 per cent of respondents were willing to assume only minimal risk.

“Asset growth is increasingly becoming a priority over simply protecting principal,” the report said about GCC-based investors, adding that 83 per cent of regional respondents agreed with the statement, versus 76 per cent globally.

But the approach comes with risks as well, particularly as regional and global stock markets appear to have reached their peaks and the potential for rising interest rates is causing investors to take a wait-and-see approach, says a Dubai International Financial Centre-based investment manager, who works for another global firm.

“Following the downturn, there was a period where regional investors were happy with growth of around 7 per cent. Now we’re seeing increased confidence where they are wanting to take more risk, but this could also lead to losses when markets post corrections. It is important to remember the factors that led to the financial crisis, which happened not more than six years ago.”

The increased risk appetite of regional investors is reflected in its stock markets, as across the GCC they have nearly doubled in value over the past year and a half. Dubai is leading the exponential rise, increasing 110 per cent in 2013 and 55 per cent year-to-date.

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