Gulf loses out as world’s richest invest closer to home

Reuters/Saudi Royal Court

• Ultra-rich family offices are investing less in the Middle east
• Just 1% of investment funds will be allocated to the region
• Experts suggest this is a short-term change and opportunities remain

Wealthy family offices are focusing more on their home markets rather than the Middle East this year.

Investments in the region are therefore set to decrease sharply in the short-term, a senior executive at Swiss global wealth manager UBS told AGBI.

Maximilian Kunkel, chief investment officer for the global family and institutional wealth team at UBS, said this was because of a greater home bias among family office managers and a move away from global diversification.

“This is something you often find in the very short-term,” he said.

“When there is greater uncertainty, with regards to monetary policy, geopolitical policy, Ukraine, people tend to focus on the home market when it comes to their investment, or at least the territory that they know already quite well.”

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The UBS Global Family Office Report 2023, published in June, surveyed 230 single-family offices around the world. Each had an average total net worth of $2.2 billion.

Respondents last year said they planned to allocate around 4 percent of their investments to the Middle East. This year’s report showed the region is likely to receive just 1 percent.

Of the US respondents to the 2023 survey, 86 percent said they plan to invest in their home market, compared with 79 percent in 2022.

Overall, 48 percent of asset investments will be in North America this year, up from 44 percent in 2022.

UBS executive Josef Stadler last year forecast that global family office investments in the Middle East would increase by at least half over the next decade. 

The prediction was on the back of a boom in the construction sector in the region and the launch of several giga-projects, especially in Saudi Arabia. 

Project contracts worth $110 billion are expected to be awarded in the GCC this year. Saudi Arabia represents more than half of the total, according to Middle East data provider Meed Projects’ 2023 outlook.

Kunkel said the drop in global investment in the Middle East was only a short-term effect as he believed “opportunities seem to be plentiful” in the region.

“This longer term positive views of international investors towards the Middle East continues,” he explained. “It’s more a reflection of the short-term developments that we’ve had.”

The Swiss bank in 2021 expanded its operations in the Middle East with a new office in Doha, and expanded in Dubai, including a wealth desk to cover Kuwait and Oman.

Stadler said in June last year the region “has massive importance” and “right now is in a sweet spot.”

Swiss authorities in March orchestrated a merger between UBS and Credit Suisse. The deal led to losses for its Gulf-based backers in Saudi Arabia and Qatar. UBS consequently restructured some of its operations in the Middle East.

Before the merger, the Middle East and Africa was one of the bank's core six global operational areas. It has now been combined with Europe.