Gazing out of the glass on the 146th floor of the world’s tallest tower in Dubai, the Burj Khalifa, I had a reasonably clear panoramic view of the rapidly growing city with only remnants of the morning fog visible.
It is a vista that the executives working at AIX Investment Group – and their growing list of clients – enjoy on a daily basis, even as Dubai’s and the wider GCC’s investment landspace expands, despite the fog that has settled worldwide due to the pandemic.
The Covid-19 pandemic has impacted economies in various ways, with most industries struggling to adjust to the crisis. However, the investment landscape has managed to remain fairly buoyant, since the pandemic has fueled a greater need to preserve and grow wealth – both globally, as well as in the GCC region.
“Interestingly, the pandemic does not seem to have adversely affected the demand for investments in the region, but rather seems to have encouraged investors – both individual and institutional – to start assessing the security of their cashflows and to consider building more diverse investment portfolios,” says Fadi Dabbagh, board advisor at Dubaibased AIX Investment Group.
“We have certainly noticed a change in the types of opportunities investors are seeking, but not a reduction in their appetite for investment. On the contrary, the appetite for investment seems to have increased and the number of first-time investors that approached us looking to begin their journey towards financial independence was higher than ever before in 2020. Our data suggests several factors for this, and many of them seem to be direct results of the changes caused by the pandemic.”
Some of these include excess cash due to reduced lifestyle expenses – most regional countries enforced lockdowns that forced the closure of entertainment avenues; an increased feeling of instability and fear of revenue disruption – several workers faced salary cuts as well as work disruptions; as well the need for additional passive income.
Meanwhile the pandemic also bolstered the need for investors to further diversify their portfolios, as they look to protect their assets. “One of the key lessons investors took from the economic uncertainty that 2020 brought is the importance of having multiple revenue streams and spreading assets across multiple uncorrelated classes. While previously we would find our investors trying to identify one of our investment vehicles as the one that most matches their needs and objectives, they are now inquiring about the possibility of splitting their funds across multiple of them. Our answer is always the same: ‘We strongly encourage you to do so’,” explains Khalid El-Mikhi, senior financial advisor at AIX Investment Group.
“In 2020, we witnessed countless businesses and industries that seemed to be on an unstoppable upward trajectory come to a screeching halt, and in many cases fail completely. This was perhaps the greatest reminder since the dotcom-bubble that allocating all of your resources into one asset class is most certainly unwise. At AIX Investment Group, we provide investors with a diverse set of investment opportunities and also seek optimal asset allocation and diversification within individual investment vehicles,” adds Dabbagh.
The shift towards diversification was already underway before the crisis. A survey by consultancy EY in January 2020 found that 23 per cent of wealth management clients in the Middle East were planning to move assets in the next three years, with 50 per cent having already moved their assets in the past three years.
If there is one standard response that you can get from any wealth manager or financial advisor, it is that there is no such thing as a “perfect portfolio”. But at the same time, most concur that diversification is key and that it is prudent to have assets spread across the risk spectrum while avoiding geographical and industry concentration.
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