In the last of our series of articles looking at the Middle East, Oliver Williams speaks with Farnoush Farsiar, founder of Dubai-based Plato Capital and a previous contributor to PBI on issues from gender lens investing to fintech.
OW: You started Plato Capital in Dubai. What do you think the city has to offer firms such as yours, as well as HNWIs, that others in the region can’t?
FF: The Financial Authority of Dubai is a very good benchmark for checks and balances and to ensure that you’re giving the right comfort to the clients in terms of the advice you’re giving.
Investors are looking for security and rule of law more now than anything given what’s going in the world.
Dubai is best suited in that respect and it’s a place where a lot of people are right now with the Expo 2020 coming up next year.
Despite the negativity surrounding real estate, in general HNWIs are optimistic about investing in the UAE. The stabilized oil prices have helped that.
OW: While oil prices have stabilised, they are still far from their 2014 highs. Where are HNWIs putting their money now to hedge against further volatility?
Prior to [the 2014 oil price shock] a lot of investors were looking at paper assets – bonds and stuff. But because a lot of people got burned, many are now more interested in private equity deals where they actually have an ownership of something.
That’s very important to Middle Eastern investors. It goes back to the inherited phycology of the Middle Eastern investor, which is investing bricks and mortar.
Given the boom and bust of the real estate markets, however, a lot of people still like to hold onto cash.
OW: What are the non-oil sectors that are attracting HNWIs today?
Healthcare has been a key focus. Not just in the UAE, though, a lot of funds that invest in healthcare are in the US.
In the UAE there are a lot of education funds that have returns of up to 15%. In the UAE or Saudi Arabia, the government subsidises education: they get coupons, which they can pay towards their education. Investing in private school education is therefore attractive.
Another interesting wave of investing has been care homes and assisted living. We are an aging population of course.
When it comes to investments, investors still continue to prefer investing in their own businesses; this is an inherent attitude that exists within the Middle East.
OW: What about the different regions within the Middle East? Where do you see people investing outside of the main financial hubs?
Turkey is one interesting area. It has very high inflation, the real estate sector has crashed and still has some way to go down. However, you make money out of uncertainty. There’s a huge surge in hospitality right now, for example.
A lot of the UAE banks have established themselves in Turkey. Emirates NBD has bought banks in Turkey and established businesses there.
Saudi is one to watch. They have an extremely young population right now, but these youngsters will be future.
OW: What do you think will be the impact of fintech on the Middle Eastern wealth management sector?
FF: It could really impact it. While banks are still trying to look at and deal with their legacy issues, the fintechs could come in and take all their business from them.
Conventional banks, they have a colossal predicament when it comes to catering for HNWIs because they are slow and it takes forever to open an account. Banks in the Middle East are fearful when making a business decision. They are ruled by risk and compliance.
But despite this, and while the young are a significant part of the population and much more tech aware, the mentality of the Middle East is still old school in going to the banks and using cheques. In the Middle East they would still like to handle rent on properties in cheques. They like having the security of having a bank branch.