Question: I live and work in the UAE, and am planning to make some investments. I am interested in investing in sukuk, and am also planning to make some investments in the emerging markets. How do I go about this?
Answer: In the first instance, it is important to identify your investment goals. After that, you need to select the type of investments and the level of risk that suits you.
You need to decide and develop a diversified portfolio, and whether you want to invest for the medium to long-term. It is also essential to remember that the value of investments can go down, as well as up, and you may get back less than you invested.
Other factors which may need consideration include your nationality and your current and proposed future residence. All these points will have a bearing upon any taxation consequences that could apply either now, or in the future. In addition, you need to be aware of the possible impact on your investments with regard to currency fluctuations, and any exchange control regulations imposed by different countries.
The outlook for the sukuk market remains positive with Standard & Poor's indicating that the total amount of sukuk issued or being talked about in the market is estimated to be about $50 billion, according to the most recent Dubai International Financial Centre's Sukuk Guide.
The UAE is the GCC leader in terms of sukuk issuance by value, with a total of $26.8 billion from 34 issuances between 2000 and 2008 — showing that investments have remained high despite being exposed to the challenges of the global economic downturn.
For some sukuk issues, it is possible for individuals to invest, while in others the issues can only be bought by institutional investors. Keeping an eye on the business news sections of the press will help.
Application
Advertisements in the media will provide the necessary information to make an application. In recent times in this region such issues have often been heavily oversubscribed, so early action on a new issue is advised.
With regard to investing in emerging countries — for those who wish to invest in shares, bonds, commodities, and property this can be done directly by the individual. You can either use the services of a stockbroker who you instruct to make the investments for you, or you can sign up with an investment arm of a national or international bank, or with an investment management company.
Investing through insurance products is also an option, or you can do it completely by yourself through one of the many investment websites that now exist. Since you are living in the UAE, you enjoy the advantage of having no exchange control limitations.
As a matter of interest, a number of investment companies have in recent times been offering BRIC (Brazil, Russia, India, China) funds, as they offer the combined advantages of investing in four developing economies ‘under one roof'.
However, the sheer volume of choice offered under such funds may prove disconcerting for those who have little or limited knowledge of the investment world. In this case, the first step could be to seek out the services of an independent financial adviser.
The writer is chartered insurance broker and sales training manager at Nexus Insurance Brokers.
