Dubai: Global sovereign investors that include sovereign wealth funds and government linked investment vehicles seeking exposure to alternate asset classes are investing in the UAE, said a senior executive from Invesco, a global investment management firm.
“Recent global capital flow trends suggest that the UAE is attracting international investments into alternate asset classes. We have noticed both sovereign and private investors from around the world are attracted to asset classes such as real estate, private equity, upstream oil & gas projects and infrastructure projects,” said Nick Tolchard, Co-Chair of Invesco’s Global Sovereign Group & Head of Invesco Middle East.
Invesco on Monday released its first Global Sovereign Asset Management Study, which offers insights into the complex investment behaviour of sovereign investors. The study notes that put off by high volatility in equities and a low interest rate environment challenging fixed income returns has forced many sovereign investors to shift their focus to alternative from their traditional core asset classes such as equities and fixed income. For example, more than two thirds (69 per cent) of sovereign investors cited growth in international real estate while 61 per cent cited growth in international private equity in the last 12 months relative to their total portfolio.
“Recent fund flow trends into the UAE suggests that global investors including sovereign investors are taking exposure to some of the alternate asset classes, said Tolchard. According to him Chinese, Latin American and Russian investors are active in the UAE, particularly in the real estate segment.
Invesco study shows Western investment sovereigns currently hold the most alternative assets with respondents having 21 per cent of all portfolio assets allocated to alternatives (including property) while those across Asia, the Middle East and Emerging Markets have much lower allocations. However, the study found the greatest prevalence of increase in new allocations in the last 12 months among the Middle East ( with 69 per cent of sovereigns cited an increase in allocations), Asia (54 per cent ) and Emerging Markets (60 per cent ) — respondents indicated some of these funds are contemplating a move to alternative programmes.
The vast majority of sovereign investors in Asia (80 per cent and the Middle East (100 per cent ) cite the biggest net increases over the last 12 months were in international real estate and international private equity. In the West, 57 per cent of sovereigns have increased allocations to home market real estate.
“The perception of the UAE as a politically stable country in the region, the overall recovery of the economy and the recovery in the real estate segment are attracting sovereign investors looking to take exposure in the region alternate asset classes,” said Tolchard.
