News Column

Impact of the ultra wealthy investor on the UAE

January 23, 2014

It's a nice thought if you live and work in the UAE . We're all going to get richer in the next decade and much of this will be significantly helped along by the significant investment in this country and region by its wealthiest residents, the Ultra High Net Worth Individuals (UHNWIs). This was the rosy picture painted by Christophe Lalandre, Managing Director of Lombard Odier UAE and Arnaud Leclercq , Partner Lombard Odier Capital Partners , during a presentation on 30 October. According to Lombard Odier, the number of High Net Worth Individuals (HNWIs) in the UAE with a fortune of AED 110 million ( $30 million ) is set to rise by 53 per cent over the next decade. The number of billionaires in the UAE will increase by 45 per cent from 140 to 203 over the next decade and there are expected to be more than 1,000 new 'centa-millionaires' - those with at least $100 million in liquid assets - in the UAE by 2016. Geographically, said Leclercq, the UAE is in the enviable position of being at the centre of the trade between China and Africa . "The UAE has built amazing and truly fantastic infrastructure and [ UAE residents] are right in the middle to enjoy this wealth." Local economic growth is also buoyed by the fact that the wealthiest members of UAE society are investing about 55 per cent of their assets in the local economy and about 45 per cent in the international market. BULLISH UAE According to Lalandre, the UAE is a growing and this is going to continue. "It is not just that the economy is expected to grow 3.5 per cent in 2013 and four per cent next year; it is also the fact that we believe it is here to stay. Growth is here to stay for the long term. "We know that this country is volatile because it is linked to the oil price and to the world economy, and when the world is collapsing you have less tourists visiting Dubai and less activity, so there is a volatility in the economy of the UAE but the trend is growth and that this looks to continue for the long-term. That's what we expect." Lalandre said the UAE's growth is linked to the oil sector but also to the non- oil economy, in particular tourism and real estate. "Growth to date has already led to more wealthy people living here; it's encouraged wealthy people to come from abroad and live in the UAE . If you take into account the Middle East as a whole, we believe that 25 per cent of the High Net Worth Individuals, that's people with more than $1 million cash in their pocket, we believe that 25 per cent of these people are living in the UAE . I'm not talking only about the GCC countries; 25 per cent of the HNWIs in the whole Middle East are here. This has led also to the fact that a middle-class has emerged in this country. This is very significant for the future. You have countries where you have wealthy people but also very poor people and nothing in between." TURMOIL AND INFLATION A wide gap between the very rich and very poor is a dangerous situation for a country to be in, said Lalandre, because, as has been seen in other areas of the Middle East , it can trigger civil war and turmoil. This is not the situation in the UAE , he says. "For us, the UAE is a stable place will remain a stable place. The wealth is led by families and 75 per cent of the businesses are organised and led by families which is extremely significant. You have families leading the growth and so you have the middle-class which brings the balance and the stability of the country." So, what impact does having even more rich people living in the UAE bring? According to Lalandre, it has an impact in many ways on many sectors of the economy, for example on the real estate market because HNWIs are investing in local real estate. Although, would that not be detrimental to the average citizen because it could increase prices? Not according to Lalandre. "No I think this growth is in fact positive for everyone in this country because the HNWIs invest in all sectors and it would make a base for stable growth and long-term growth." The one downside to increasing wealth is increasing inflation, Lalandre said. However, this is not a serious concern. "If you have high growth then higher inflation is not a worry. If this growth of 3.5 to four per cent annually continues then you don't mind having inflation of three per cent because your growth is more than covering the inflation. Many European countries today would be more than happy to have inflation of three per cent and growth of four per cent." RICH REWARDS Lalandre believes that having more rich people living in the UAE is going to benefit the whole populace. He said this might not be the case in other countries where the trickle-down effect does not work because wealth is not distributed through all levels of society but in the UAE , it's different. "There has been distribution of the wealth and this distribution has been spread to a high number of the population. When you look at the properties, buildings, houses etc being given to the local population, to people in the middle, it means there is a distribution from wealth to all spectrums and all classes of the population. "This is UAE specific because the same weight of rich people in another country could have a different impact. It's different here because wealth helps the middle class to emerge and grow and to keep the ball rolling." Yes, the gap between rich and poor will also widen here, said Lalandre but "wider and wider does not mean poorer become poorer; wider and wider means everybody gets richer. The difference between the richest and the poorest is bigger but the poorer are still going to be richer than before. "All classes benefit from the increase of the wealth of the richest of the population in this country, all classes." Founded in 1796, Lombard Odier & Cie is the oldest firm of private bankers in Geneva . Globally, LO has about CHF 155 billion (AED 625 billion/ $170 billion ) of assets under management. The company is present in nearly 20 countries and is one of the largest firms of private bankers in Switzerland and Europe . A Dubai office was opened in 2006. Lombard Odier & Cie , Representative Office Dubai Managing Director, Arnaud Leclercq The Fairmont, 25th Floor, Sheikh Zayed Road P.O. Box 212240, Dubai, UAE Tel: +971 4 509 0111 Email: dubai@lombardodier.com www.lombardodier.com UAE BACK ON TRACK Prime house prices are growing faster than anywhere in the world Growth in the non-oil sector will be significant in coming years Property growth in the UAE to rise by 3.5 per cent in 2013 and four per cent in 2014 More than 5.5 million tourists visited Dubai in the first six months of 2013 The difference between the richest and the poorest is bigger but the poorer are still going to be richer than before. All classes benefit from the increase of the wealth of the richest of the population in this country, all classes


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Source: Wealth Magazine (United Arab Emirates)


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