News Column

Boutique openings

June 30, 2014



The Middle East is aflush with wealth. Decades of piling petrodollars and facilitating trade have created massive fortunes, investment arms, concentration of wealth and of course, a spending spree that has left a distinctly Gulf flavour in many traditional financial centres such as London and Paris.The estimated wealth in the region is to the tune of trillions of dollars.

Global advisory firm Boston Consulting Group (BCG) estimates that the region's wealth will grow to $6.5 trillion in 2017 from the $4.5 trillion measured in 2011.

Certain states such as Qatar, which has the third largest per capita GDP of $106,393, according to 2013 figures from the International Monetary Fund, are also swarming with millionaires.

In 2012, an estimated 143 our of every 1,000 households had wealth exceeding a million dollars in Qatar - the highest concentration in the world- according to the BCG.

Kuwait was not too far behind, finishing third on the list with 115 millionaires among every 1,000 households.

In order to multiply and preserve their wealth, the Middle East's millionaires and billionaires are turning to exclusive boutique advisory firms to cater to their specific needs.

"If you look at any of the big banks, the turnover of people, either voluntary or involuntary is so high, the clients get fed up," says Rohit Walia, executive chairman of Alpen Capital.

"Every two or three years, you see a new face. It doesn't work and I think in a smaller outfit, if you have continuity, which is what the client needs - he wants to see the same person to handle the business. I also think they need a little bit more attention."

The Dubai International Financial Centre (DIFC)-based investment bank, established itself in the region in 2005, the same year as its associate and parent Bank Sarasin-Alpen.

While the latter, part of a reputed 173-year old Swiss private banking institution J Safra Sarasin Group has already carved a niche for itself with high net worth entities, Alpen Capital is offering more exclusive options.

The firm launched Alpen Asset Advisors earlier this year to provide independent advisory services to mostly to cash-rich family businesses.

"Clients have different needs. We don't deal with retail clients. We deal with very, very large sophisticated clients, who have their own thoughts, their own ideas and they need them to be done," explains Walia.

"One particular bank is not able to execute their thought and so they let the client go, which is not a good idea. So that is why this third platform has been set up with the DIFC, which has an open architecture."

This "multi-banking platform", which will be launched in Bahrain next is far more common in Europe than in the Gulf, adds Walia.

"I think we are one of the first few to start it. In Europe however, this has been around for the last 15 to 20 years, where the clients will come to an independent firm and look for independent options, instead of going to one particular bank and buying what the bank is selling."

Family businesses, which comprise three-quarters of the GCC's private sector activity are on a modernising path and are recruiting independent firms to manage their investment portfolios.

"Their concerns today are whether to stay in all the businesses that they've acquired or built up over the last 10, 20 or 30 years," says Walia.

"Everybody realises that there is no way they can do everything. So there is a lot of M&A [mergers and acquisitions] activity going on, people either buying or selling businesses from each other depending on what suits their portfolios."

The options that investors choose today are more conservative, acknowledges Walia.

Following the financial crisis, the risk profile and appetite of high net worth investors has become more cautious.

The issue of trust has never been more critical, following the financial crisis of 2007-08, for which several global investment banks received blame. A 2013 report by family business advisory firm Campden Wealth found that 60 per cent of respondents in the GCC scrutinised their relationship with their private bank more frequently last year than they did a year before.

"If there is any silly idea, it used to be taken up, not anymore," says Walia.

"People ask and they try and understand and mostly, they won't do anything, which is highly geared. Things have changed a lot in the last two or three years."

The ongoing conflict in the region has also made centres such as Dubai a magnet for capital flight, especially in the real estate and hospitality sectors.

Managing this capital will be another project for Gulf-based asset managers.

"I think the only impact is that the geographies where some of the turmoil is taking place, which were looked at some five or ten years ago positively for investment are not being looked at favourably any more," says Walia.

Alpen Capital, which has executed more than $10 billion worth of transactions till date, perhaps boarded the bandwagon foresightfully early in recognising the GCC as a competitive financial hub.

This year the firm's Abu Dhabi and Riyadh offices will become operational, joining a network that includes Dubai, Muscat, Doha, Bahrain, Delhi and Mumbai.

Only last month, Japanese Nomura Asset Management, which is one of Asia's biggest fund managers set up office in Dubai.

Its chief executive Tarek Fadlallah was quoted by Reuters as saying that "more funds from the GCC will flow east than flow west."

GCC-based family businesses, which tasted bitter luck following the financial crisis in the western economies, are still looking at eastern emerging markets as viable options, says Walia.

Alpen Capital, for instance is working to enable cross-border opportunities between GCC and Indian firms, who look at the region for cheap energy, credit and logistical facilities in order to tap into the wider Commonwealth of Independent States and African markets.

"The families have lost a lot of money in the west. A lot of investments were made and for a lot of Dubai companies, the values have been halved and a lot of money has been lost," says Walia.

"So maybe there is a chance to look at this side of the world and see if that is a more rational and sensible place to invest in. But I think the west will be back, it is already coming back very strongly. People could get spoilt for choice."


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Source: Gulf, The (Bahrain)


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