Dubai: Most of the investors in the UAE react emotionally to markets, which poses a real challenge, and hampers the attainment of financial goals, a survey revealed.
About 89 per cent of investors said they take investment decisions based on gut instincts and about 63 per cent has no clear financial plan, a survey of financial advisors conducted by Natixis Global Asset Management said.
“Financial advisors cannot control the markets, but they can head off adverse reactions by creating portfolios designed to stand up in a variety of market conditions,” said John Hailer, chief executive officer of Natixis Global Asset Management in the Americas and Asia.
Fifty-five per cent of UAE advisors say traditional diversification and portfolio construction techniques need to be replaced with new approaches to achieve results.
When questioned on the suitability of the traditional 60/40 portfolio, only 26 per cent of UAE advisors agreed and 12 per cent strongly agreed, which is in line with global statistics.
The sample size of the survey was 150 in the UAE, of which 78 are independent financial advisors, 21 are tied financial advisors, 39 are heads of an advice firm, 8 are wealth managers and 3 are in other advisory roles.
The average client portfolio size is Dh2.1 million. The average firm represented by each advisor managed about Dh10.1 billion. The total level of assets of firms in UAE involved in the study amounted to Dh1.5 trillion.
Providing confidence is critical to success of investors and advisers, Natixis said.
“Providing clients with a less emotional path to achieving their long term saving goals is essential to sustaining growth for retail investors across the region,” Matt Shafer, managing director of international distribution at Natixis Global Asset Management, said.
Fear and greed
Most of the investors in the UAE were concerned about the recent sell off, hoping that the conditions were not a repeat of the crises of 2008.
The Dubai Financial Market General Index shed about 14 per cent before gaining 4 per cent last week, weighed by fears of a slowdown in global growth amid a sell-off in crude oil markets.
“Most of the investors were concerned about the recent sell off, they wanted to know was it a repeat of 2008 and we told the factors that resulted in the sell off. They were convinced about it,” Saleem Khokhar, head of equities at NBAD Asset Management Group, who helps manage a portfolio of Dh7 billion out of the total size of Dh11 billion, told Gulf News.
Concern that a Europe-led slowdown in global growth would hurt the world’s largest economy, just as the Federal Reserve winds down stimulus, erased as much as $2.1 trillion (Dh7.7 trillion) in US equity values after they reached a record on September 6.
“My job as a fund manager is to see through the real underlying cause of a correction or fall in markets and act in the best interest of the client in a particular situation. We try very hard to remove emotional element out of investing. We follow a rigorous fundamental valuation process. As an independent fund manager we take more rationale independent positions,” Khokhar said.
