A majority (61%) of investors are more actively managing their wealth and making changes to their investment strategies, given current economic challenges, a study says.

Standard Chartered’s Wealth Expectancy Report 2022 examines the shifts in investor decisions for more than 15,000 emerging affluent, affluent, and high net worth (HNW) investors in 14 markets – including the UAE – along with the resulting movements in major asset classes.

Outpacing inflation

Investors in the UAE cited inflation (30%), the threat of recession (21%) and an uncertain global economy (20%) as their top concerns. Rising inflation (34%), a recession (27%) and uncertain global economy (22%) are key worries for investors internationally too, it said.

In the past year, local investors have made changes to their finances, such as spending less (29%) and making new decisions around their portfolios (27%), which will prompt shifts in major asset classes.

To outpace inflation, 61% of global investors are looking to reduce their cash holdings, compared to 71% in the UAE. Standard Chartered predicts that global cash allocations will fall from 26% in 2022 to 15% in 2023, indicated by investor responses.

Investors are also reconsidering their holdings of equities as market volatility increases, although this asset class will remain an integral part of portfolios. Of those currently invested in equities, there is an indication that the allocation of equities in UAE investor portfolios to fall from 10.1% to 6.9% in the next year based on survey responses.

Dr Owen Young, Head of Affluent and Wealth Management for Africa, Middle East and Europe at Standard Chartered Bank, said: “Investors in the UAE face a complex reality, with inflation, the threat of recession and an uncertain global economy ranking as their top concerns, which is a common concern among investors across the globe. Our research reveals that UAE investors are making changes to their portfolio allocations in response to these challenges, which increases the importance of aligning these decisions to their long-term objectives and the global environment.”

The report also revealed that this year, gold continues to be of high interest for UAE investors, with 51% saying they have invested as a result of inflation, in addition to combat inflation in 2022 there is, interest in value stocks at 45% and bonds at 45%.

Sustainable investments will continue to receive investor interest and capital, even though greenwashing concerns persist. More than half of global investors (52%) expect to increase their sustainable investments in 2023. 54% of investors in UAE will also do so.

Digital assets continue to interest investors

The research reveals that 72% of local investors still believe that digital assets are an important part of any investment portfolio, despite multiple setbacks in the market this year.

Currently, 66% of global investors hold digital assets, compared to 73% in UAE. Looking ahead, 71% of local investors surveyed plan to increase their investments in digital assets in the coming year. This is in part because many said they have seen people make significant returns off digital assets (36%), and 36% consider them to be a good way to diversify their portfolios.

However, it is important to note this survey was conducted before the FTX crash and the events of the past few weeks may dampen this sentiment.

Helping investors make better decisions

While most global investors polled (62%) were primarily managing their own finances, with some variation across markets. Many investors in UAE (37%) use professional wealth managers. On average, across the 14 markets, younger (18-35) investors (63%) are more likely to use a professional compared with 39% in the 55+ bracket. On average, investors taking advantage of professional advice were more likely to have diversified portfolios and higher holdings in sustainable investments.

Dr Young concluded: “We believe that diversified portfolios with multi-asset income generation strategies provide some of the best opportunities for investors in the UAE. This combined with professional investment advice tailored to their long-term goals will help them ride out the current market conditions and achieve their objectives.”