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Middle East Investment Panorama 2012

Global challenges, local opportunities

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International Life Company

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Includes a Roubini Global Economics

research report on MENA

International Asset Management Companies

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Middle East Investment Panorama 2012

Executive summary 4-5

Research summary 6-8

What makes the life insurance market dierent? 9-11

What do advisers want from international life companies? 12

Who are the international life companies that advisers use? 13-14

How are clients’ exposure to dierent asset classes likely to change? 15-16

What do advisers want from international asset managers? 17-18

Who are the international asset managers that advisers use? 19

What are the hard numbers? 20-21

Afterword 22

Leadership thought articles 23-28

- Roubini Global Economics

- Amundi Asset Management

- Franklin Templeton Investments

- Morningstar

About Insight Discovery 29

CONTENTS

32

Welcome to Insight Discovery’s Middle East Investment Panorama 2012. This is the third systematic survey that we have undertaken in relation to how the services of international life companies and international asset managers are actually used by advisers in the

six Gulf Cooperation Council (GCC) countries.

In contrast to our surveys in 2011 and 2010, this time we have focused much more on people who would be regarded as independent financial advisers (IFAs) as understood in the UK. Last year, our sample included around 80 such individuals – and many more people who work for commercial banks, family o�ces and other institutions. This year, our sample of financial advisers was larger, 110 out of the total sample of 212. We believe this makes it the largest survey of independent financial advisers and wealth managers in the region ever to have been undertaken.

Last year, we concentrated on the usage of the products and services that are oered to advisers and their (overwhelmingly expatriate) clients by the international asset management companies. This year, we have focused on the products and services of international life insurance companies. This shift in emphasis is timely. Over the last year or so, it appears that usage of the international life companies’ oerings has increased. Further, the international life companies have become more important as distributors of funds managed by the international asset managers.

The economies of the GCC countries remain among the fastest growing in the world. In spite of governments’ laudable policies to boost local participation in the workforce, all the economies remain dependent on expatriates. For the most part, the expatriates are looking to save and to build wealth. Aside from those who actually work in the financial services industry, the expatriates need financial advice.

This is the fundamental reason why the GCC countries represent such a big opportunity for the advisers – as well as

the international asset managers and life companies that serve them. With the economies, and the numbers of expatriates, continuing to expand, that opportunity can only increase.

The opportunities are much more important than the challenges. Yet again, we asked advisers for their views on well known issues such as the political unrest associated with the ‘Arab Spring’, vagaries of oil prices and the uncertain regulatory environment. Relative to 2011, there are – in general – fewer pessimists. Crucially, it is usually possible to find as many optimists in relation to any one issue as there are pessimists. The advisers and their clients are risk tolerant.

All this is happening at a time that the GCC governments are taking steps to promote the development of financial services generally as they seek to reduce the dependency of economies on energy revenue. Although the details dier from country-to-country, it is possible to identify very real and positive changes in each of the six GCC nations’ financial services sectors over the last two years.

Accordingly, we believe that now is a most appropriate time to ask the question: what does this future hold for financial services in the GCC countries? This will be the topic of Insight Discovery’s next roundtable. We will publish a comprehensive overview of the discussion in early November 2012.

We are also honoured to include this time an anaylsis of the region’s financial prospects from the Middle East team at Roubini Global Economics, recognized as among the most insightful and accurate of economic forecasters.

As ever, we note that the research and publication of the Middle East Investment Panorama 2012 would not have been possible without the generous support of our sponsors and partners. To them we remain extremely grateful.

Nigel Sillitoe Chief Executive O�cer,

Insight Discovery

INTRODUCTION

Gold partners

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EXECUTIVE SUMMARYEXECUTIVE SUMMARY

countries. A substantial majority of advisers – 60% see the large and growing numbers of expatriates from South Asia (i.e. non-resident Indians or NRIs, Pakistanis and Bangladeshis) as a big opportunity for the international life companies and for the advisers themselves.

6. The asset classes in which the advisers and their clients have the greatest interest have changed little over the last year or so. There remains a clear a�nity for emerging markets equities, but little interest in the markets of the GCC countries themselves. Nearly 60% of advisers prefer global emerging markets equity funds: the remainder are broadly split between those that use regional funds (13.2%) and those that use single-country funds (15.1%). The product range of an international asset manager that wishes to do substantial business with GCC advisers should also include a cash management product, along with funds that focus on fixed income securities in developed countries. The ‘hottest’ alternative asset classes appear to be gold, commodities and (listed) real estate – in that order. Conversely most advisers either have no interest in hedge funds or are reducing their positions.

7. Because of the disinterest on the part of local households in insurance generally, Takaful products are still struggling to achieve their potential, although particular Takaful operators based in the GCC have achieved good growth over the last year. Less than half of the advisers surveyed this year said that they consider Takaful to be a major opportunity for life insurers in the region, while 33% of advisers either have no view about Takaful or see it as a neutral factor. Nevertheless, there is an unexploited opportunity for international life companies that can develop Takaful oerings that are attractive to expatriates in the GCC and the advisers who work with them.

8. Over the last year, the geopolitical situation across the MENA region has remained unsettled. The financial crisis in Europe has lingered. There is economic uncertainty in China and other parts of Asia. Many retail investors continue to avoid the GCC’s local financial markets. Above all, the regulatory environment remains murky in much of the region. Nevertheless, the numbers of advisers who are pessimistic about these issues have fallen relative to the numbers who see them as opportunities. In spite of the challenges, financial services have continued to develop and grow across the GCC countries. The advisers and their clients are very risk tolerant.

9. As was the case last year, the international asset management companies that are most widely used include BlackRock, Franklin Templeton, JP Morgan Asset Management, Fidelity, Schroders and Invesco. Other international asset managers that are doing business with advisers in the region include HSBC Global Asset Management, Aberdeen, and

Threadneedle. This year, Natixis has emerged as a company whose services are highly rated by those advisers who use them. Around 10 international life companies are active across the region. They include Zurich International Life (ZIL), Friends Provident International (FPI), Skandia International, MetLife Alico, Royal London 360°, Generali, Swiss Life and Hansard. 70%of advisers think that there is room for new international life companies to enter the market. The advisers were asked to identify just one international life company that they would like to see establishing a presence. Two companies were heavily mentioned, Prudential, by 17% of the advisers and Standard Life, by 15%.

10. In summary: there is, and will remain, a huge opportunity for international asset management companies and international life companies to do business with advisers across the GCC. The issues that are most widely seen as challenges are well understood and are often seen as positive factors. The economies are growing. The numbers and wealth of expatriate workers – particularly those from the UK and South Asia – are increasing. By necessity as well as by choice, advisers embrace Open Architecture and will normally work with a variety of external providers of products and solutions. The investment preferences of the advisers’ clients are clear. There is obviously scope for new international life companies to enter the market: given the international life companies’ key role as distributors of funds, this is good news for the international asset management companies as well .

Executive Summary - Middle East Investment Panorama 20121. Almost all advisers in the Gulf Cooperation Council (GCC) countries use the products and services of international life insurance companies, international asset management companies, or both. Last year, about half of the advisers surveyed in Insight Discovery’s Middle East Investment Panorama said that they deal with international life companies. This year, the figure is 63%. We are satisfied that the number of advisers dealing with international life companies is genuinely on the rise.

2. Nevertheless, there is still a significant minority of advisers who are not using the products and services of the international life companies. This means that the international life companies still have room to grow their businesses across the GCC through reaching out to ‘new users’ among advisers. The advisers deal overwhelmingly with expatriate workers. There is a huge potential market among GCC national households, but for now GCC nationals are satisfied with the generous social security programs their governments provide.

3. The international life companies have become more important as distributors of investment funds sourced from the international asset managers. Last year, 40% of advisers were buying funds directly from investment managers. This year, the corresponding figure is 29%. Conversely, purchases of funds through platforms run by the international life companies, and ‘mirror’ funds oered

by the international life companies, have increased. Whether directly or indirectly, 84% of the advisers in the GCC use the products and services of international asset managers.

4. Overall, the advisers have a clearer view of what they want from international life companies than from international asset managers. It is absolutely crucial that international life companies which want to do business have an on-the-ground presence and are able to provide excellent support to the advisers who use their products and services. The international life companies should also strive to provide advisers with access to the international asset managers who run the underlying products which the international life companies are distributing. International asset managers will, ideally, have good investment performance over virtually all periods and a good reputation. Advisers in the GCC are not particularly concerned by international asset managers’ fee structures or the extent to which they outsource functions.

5. The advisers – and, presumably, their clients – come from predominantly from two countries: 37% of the advisers who participated in the Middle East Investment Panorama this year come from India; 31% come from the UK. Nearly one-fifth (%) come from Pakistan and countries in the Middle East and North Africa (MENA) region. Of those advisers from MENA countries, the majority are predominantly from non-GCC

Key findings•Advisersandclientsareincreasingly‘risktolerant’andoptimisticdespitelocalandglobal

economic volatility, and regional regulatory uncertainties. •ThevastmajorityoffinancialadvisersintheGCCregion–some83% – use the products and

services of international asset managers•Theproportiondealingwithinternationallifeinsurancecompanieshasrisensubstantially,to

63%, but there are still opportunities in this area•Aclearmajority–60% – is focused on global emerging market equity funds, while the

‘hottest’ alternative asset classes are gold, commodities and listed real estate.•ThepotentialforfamilyTakafulremainsunderexploited,withfewerthanhalfofadvisers

saying they see it as a major opportunity for life insurers.•Thebiginternationalassetmanagersarestillveryactiveintheregion,butadvisersbelieve

there is still scope for new entrants from among the leading life companies.•Thereareapproximately3,700 financial advisers working in the UAE, a far bigger number

than previously estimated. Breakdown appears in the section What are the Hard Numbers?

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RESEARCH SUMMARYRESEARCH SUMMARY

that are most suitable for their needs. Local households who use the oerings of the international life companies and the international asset managers do exist. However, the locals are a low percentage of the overall market. This is because they have access to extremely generous benefits from governments.

Just as we have not sought to identify the needs of local households, we have not tried to examine the needs of the Sovereign Wealth Funds of the GCC countries. It is well documented that these organisations account for massive pools of o�cial wealth. It is well known that they use the services of international asset managers, with key decisions often made outside the region in global centres such as London or New York. The Sovereign Wealth Funds have little need for the oerings of international life companies.

Nevertheless, we acknowledge that there remains an important reason why this year’s Middle East Investment Panorama – like its predecessors – understates the total opportunity for international asset managers and international life companies. Many of the GCC countries’ high net worth individuals (HNWIs) conduct their dealings with private banks in oshore financial centres outside the region such as Switzerland or Singapore. These private banks are, therefore, distributing the oerings of international asset management companies – and, in all probability, international life companies – to the HNWIs.

The Middle East Investment Panorama 2012 is Insight Discovery’s third systematic survey of the opportunities for international life insurance companies and international asset managers across the region, with a focus on the GCC countries.

Like its predecessors, the Middle East Investment Panorama 2011 and the Gulf Professional Adviser Survey of 2010, it focuses on the advisers who, for the most part, are occupied with assisting expatriate workers. This year’s Middle East Investment Panorama diers from its predecessors in a number of important ways.• Thenumberofonlinesurveyrespondentswhohadto

be excluded because they work for an international life company or international asset management company fell from 36% to 15%.

• Oftheremainingsurveyrespondents,amuchgreaterpercentage work as independent financial advisers,in the sense that would be understood in the UK, or as international private bankers. Last year, these two groups accounted for 23% and 13% of all respondents. In 2012, the corresponding figures are 44% and 16%.

• Thisyear,wehavenotexaminedhowadvisersusetheproducts and services of regional asset management companies, as opposed to international asset management companies. This is because it had become obvious from the Middle East Investment Panorama 2011 and from the Gulf Professional Adviser Survey of 2010 that advisers, and their clients, had little interest in investing in the local financial markets of the GCC countries. This finding was confirmed again this year when we asked advisers to discuss likely changes to the overall asset allocations of their clients’ portfolios.Most importantly, we have this year focused on the

usage by advisers of the products and services of the

What is the Middle East Investment Panorama 2012?The countries of the Middle East and North Africa (MENA) region and, in particular, of the Gulf Cooperation Council (GCC) represent a growing opportunity for international life companies and international asset management companies

This opportunity exists partly because of the continuing growth in the foreign reserves of the countries that are major exporters of oil and gas. It is also partly because of the absolute size of the region. The six GCC countries – Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, Qatar and Oman have a combined population of about 42 million people with relatively high standards of living. The governments of the region are promoting diversification of their economies away from production and export of energy. The governments of Dubai, Qatar and Bahrain have

been particularly active in encouraging the development of financial services.

Most crucially, the GCC countries are home to millions of expatriate workers. These people are, for the most part, looking to take advantage of opportunities that are not available to them in their home countries – and to accumulate wealth. Aside from the small minority of expatriate workers who are employed in the financial services industry, most of the expatriates need the help of financial advisers to identify the products and solutions

Who is an adviser?The research for the Middle East Investment Panorama was conducted in May and June 2012. It was undertaken through online resources, through Computer Assisted Telephone Interviews (CATI) and through face-to-face meetings. The total number of respondents was 253, however after screening out individuals who weren’t eligible the sample became 212. Of these 212 respondents, 98% – almost all – worked for companies that had had dealings with international asset managers and/or with international life companies.

Throughout this report, we have referred to the sample 212 individuals as ‘advisers.’ In fact, 60% of them do work for financial advisory/ wealth management firms or international private banks. The remainder work for a variety of family o�ces, corporate investors, commercial banks, retail banks and pension plans. Put another way, about 40% of the ‘advisers’ are actually executives who are making investment decisions for their employers.

Most of the advisers could be described as senior managers (directors and department heads) or middle managers. These groups accounted for, respectively, 34% and 39% of the 212 advisers that

we included in this year’s Middle East Investment Panorama. A further 15% of the advisers can be considered to be top management (Chief Executive O�cer, Chief Investment O�cer, Board Director or General Manager). Non-managers (19%) and junior managers (4%) made up the remainder. Of the 212 advisers, a little over half – 56% – are aged between 30 and 39 inclusive. Another 22% are aged between 40 and 49; 15%, 50 and over. Only 7% of the advisers are aged under 30. Although the Middle East Investment Panorama is open to participation by advisers from across the Middle East and North Africa (MENA) region, 98% of the advisers surveyed this year work

in the Gulf Cooperation Council (GCC) countries. No fewer than 85% of the survey respondents work in the United Arab Emirates (UAE) alone. Saudi Arabia, Bahrain, Kuwait, Oman and Qatar account for another 13% or so of the advisers.

Like most of the clients that they serve, the advisers themselves are, overwhelmingly, expatriates. In terms of where the advisers come from, two countries stand out. No fewer than 37.4% of the advisers in the survey come from India. Another 30.7% come from the UK. Pakistan is home to 4.5% of the advisers. A further 14.7% come from the MENA region: within this group, the majority comes from outside the GCC countries.

0 | MEIP Survey – August 2012

Top  management  (CEO,  CIO  or  

board  director,  General  Manager)    14.8%  

Senior  management  (Directors  and  

Heads  of  departments)  

 34.1%  

Middle  management  (Managers)  

 27.3%  

Junior  management  (Assistant  Managers)  

 4.0%  

Non-­‐management  

 19.9%  

CHART  1-­‐  Demographics  |  Respondents  profiles  -­‐  2012  

Current Position Age group

6.8%  

56.3%  

21.6%  

15.3%  

Under 30

30-39

40-49

50 & over

Sample Size 212

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LIFE INSURANCE

international life companies. This is partly to compensate for the orientation of the previous surveys towards international asset management companies. In addition, it recognises that the international life companies themselves play a

dominant role in the distribution of the international asset managers’ funds across the region.

In short, this year’s survey could be described as ‘more targeted, more adviser, and more international life’. The consequence of this is that it is ‘more UAE’. That country, and Dubai in particular, accounts for the overwhelming majority of dealings between advisers and international life companies that takes place across the GCC region. Nevertheless, we stress that we believe that the insights which may be drawn from this report are relevant to international life companies and international asset managers who wish to promote their products and services in the other GCC countries.

What makes the life insurance market di�erent?It is quite easy to identify factors that make the market for life insurance, both in the GCC countries and across the broader MENA region, unusualIn the GCC countries, comprehensive social security systems mean that many citizens have, or believe that they have, no need for additional protection or savings products. Understanding of life insurance is, therefore, generally considered to be lower than in other parts of the world.

Although the economic situation in the GCC countries remains – overall – positive, the ‘Arab Spring’ of early 2011 added to volatility in financial markets: whether rightly or wrongly, the events of last year were seen as increasing the risks associated with investment in the region. Insurance industry insiders often allude to regulatory environments that are ill-defined or rapidly changing. Relative to their counterparts in the rest of the world, many of the locally-based companies, whether they are oering life insurance, health insurance or general insurance solutions, are small and lacking in capital.

The Middle East is an obvious area of opportunity for family Takaful – Sharia-compliant life insurance. Finally, the number of expatriates from South Asia that are working in the region –

which is already large – will likely continue to grow as economies continue to expand.

We asked the advisers who use the products and services of international life companies to indicate how they regarded each of the various factors that make the life insurance market in the GCC countries dierent to its counterparts in other parts of the world. Specifically, we asked the advisers to indicate whether they saw each factor as a major challenge, a challenge, an opportunity or a major opportunity. We also gave them the opportunity to provide a neutral answer.

In relation to each of the various factors, there is a considerable diversity of opinion from the advisers who use the services and products of the international life companies. That there is a huge variety of views among advisers who are actually on the ground in the GCC countries is one of the most important insights from the Middle East Investment Panorama 2012.

The factor about which there is the greatest consensus is the large and rising number of expatriates from South Asia.

MEIP 2011 v MEIP 2012Insight Discovery has undertaken three comprehensive surveys of how advisers in the GCC countries and the broader MENA region work with international asset management companies and international life companies. The first survey was the Gulf Professional Adviser Survey (GPAS) of 2010. The second was the Middle East Investment Panorama of 2011. This, the latest Middle East Investment Panorama, diers from its predecessor in a number of respects.• Thisyear,theadvisersparticipating

in the survey are even more likely than were their counterparts last year to use the products and services of an international asset management company or an international life insurance company. Last year, 91% of advisers fell into this category. This year, the corresponding figure is 98%.

• In2012,farmoreoftheadvisersareadvisers in the generally accepted use of the word. Last year, 23% of the individuals who participated were employed by financial advisory/wealth management firms, while another 13% worked for private banks. This year, the corresponding figures are 44% and 16%.

• Thenumberofnon-managershasincreased from 16% of respondents who were included in the survey in

2011 to 19% this year. There has been a corresponding decrease in the number of junior managers. The increase in the number of non-managers this year is due to the significantly larger number of financial advisers and private bankers who participated in the survey.

• Asacorollaryoftheincreaseinthenumber of financial advisers and private bankers is that the numbers of survey respondents who are based in the UAE has risen from 65% last year to 85%.

• AdviserswhooriginallycomefromIndia or the UK have become more numerous. Last year, they accounted for 33.3% and 28.4% of the survey respondents. This year, as noted elsewhere, the corresponding figures are 37.4% and 30.7%.This year, we asked the survey

respondents to comment on whether a number of topical issues – changing regulations, the volatility in the price of oil, the continuation of the ‘Arab Spring’ and the home country bias of retail investors – represented a challenge or an opportunity for the advisers’ businesses. Nearly half of all advisers who participated in this year’s Middle East Investment Panorama see changing regulations (whether in the GCC country in which they are operating or in their employer’s home country) as a challenge. Interestingly, 47% of advisers

say that changing regulations are an opportunity for them.

Meanwhile, the numbers of advisers who see oil price volatility and the continuation of the ‘Arab Spring’ as challenges are balanced by those of advisers who see these issues as opportunities. In each case, this is true of 40-45% of survey respondents. The home country bias of retail investors is the only one of the four issues where the number of advisers that perceive a challenge (46%) is significantly higher than the number that perceives an opportunity.

The views of the survey respondents last year were markedly dierent relative to this year. Overall, the pessimists were more numerous in 2011 than they were this year (except in relation to the impact of oil prices and the emergence of new financial centres in the MENA region). A crucial change is that there is now much greater balance between the numbers of optimists and pessimists. This may be because financial advisers and private bankers are relatively more numerous this year. It may also be because financial services have continued to develop across the GCC – in spite of yet another year of unsettled geopolitics, lingering financial crisis in Europe, economic uncertainty in China, murky regulatory environments and the entrenched reluctance of retail investors to invest in the financial markets of the GCC.

RESEARCH SUMMARY

‘The governments of the region are promoting diversification of their economies away from production and export of energy’

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LIFE INSURANCE

‘Arab Spring’ as an opportunity – perhaps because events had highlighted the political and economic resilience of most GCC countries.

However, the small scale and lack of capital of most local insurance companies is a problem. Over 40% see the size of the local insurers as a major challenge. Only one-fifth see it as a problem. A greater number of advisers had a neutral view on this factor than on any other. This could well be because most of the advisers are working, overwhelmingly or totally, with international life companies. The clear implication is that development of life insurance in the GCC countries will be driven by international companies – and not local insurers.

The regulatory environment across most of the GCC countries is one of two factors in relation to which advisers are polarised. Nearly half see the regulatory environment as being a (major) challenge. Conversely, well over one-third see the regulatory environment as being a (major) opportunity. It is notable that, among the advisers, pessimists who see the regulatory environment as being a major challenge are roughly twice as numerous as those who see it as a major opportunity. The implication is that the relevant authorities in the Dubai International Finance Centre, the Qatar Financial Centre and Bahrain have done a good job of developing – and promoting – strong regulatory environments. However, improvements are needed elsewhere.

Virtually every adviser has a view on the general volatility of financial markets. The number of advisers who see the volatility of markets as an opportunity is the same – at nearly 36% – as the number who consider it to be a challenge. However, once again, it is the pessimists that have the upper hand – in that those who see market volatility as a major challenge outnumber those who see it as a major challenge two-to-one. The implication is that life insurance products which shelter

the clients who buy them from the impact of financial market swings should sell well in the GCC countries.

If the appreciation of life insurance on the part of expatriates from South Asia is seen as the largest opportunity, the lack of understanding of life insurance on the part of local people in the GCC countries is viewed as the greatest challenge. Well over half of the advisers see this as a (major) problem. However, there is a significant minority of optimists – more than one-fifth of all advisers, in fact – who see the locals’ lack of understanding as a major opportunity. Presumably, the optimists are of the view that they can grow their own businesses significantly if they – or the insurance companies – can do a good job of educating the locals.

The bottom line is that the GCC countries are, and for a long time will be, an area of significant opportunity for international life companies. Traditionally, growth has come from the rise in the number of wealthier expatriates, particularly from the UK, as economies have developed. Going forward, the opportunity will be driven substantially by expatriates from South Asia and, perhaps, locals. The international life companies who can turn the challenges to their own advantage should thrive.

How could an international life company do this? One obvious approach is to reach out to South Asian expatriates, possibly with a compelling Takaful product. In terms of product benefits, such a life company would emphasise the protection from vagaries of political developments in the Middle East and (more importantly) financial markets in general. Such a life company would also emphasise the security that comes from the regulatory regimes under which it operates. A company that is able to educate the locals – many of whom have believed that they do not need life insurance products – could achieve enormous growth.

Well over 60% see this as a major opportunity – presumably for both advisers and international life companies. Both India and Pakistan are home to substantial life insurance companies, some of which are owned by the governments and others of which are private sector organisations. Companies like the enormous Life Insurance Corporation (LIC) of India already have a presence in the GCC countries – seeing the Indian expatriates who are present as potential customers. Another 31% of advisers had no view, or saw the growth in the number of

expatriates from South Asia as a neutral factor. Fewer than 10% saw it as a challenge.

In spite of the rapid growth of particular Takaful operators in the region, and the expansion of Takaful-like co-operative insurance in Saudi Arabia, it is perhaps surprising that fewer than half of the advisers interviewed see the rise of Takaful as a opportunity. In fact, the number who see Takaful as an opportunity, but not a major one, is only marginally larger than the number who have no view or who see this as a neutral factor: put another way, these two groups included about two-thirds of the advisers who use the products and services of international life insurance companies. Fewer than one-fifth suggested that the rise of Takaful was a major challenge. It is possible that the majority of the advisers are working with clients who have little interest in, or understanding of Takaful. It may be that the amount of client education that is needed in relation to Takaful is greater than for the benefits of life insurance in general.

The ‘Arab Spring’ had a substantial impact on Bahrain, but considerably less eect on the other GCC countries. Nevertheless, well over one-third of the advisers interviewed said that they saw the political events of last year as a major challenge. Another quarter had no view, or thought that the ‘Arab Spring’ was a neutral factor. The remainder saw the

The regulatory wildcardIn mid-September 2012, a number of observers, ourselves included, were surprised by an aggressively worded warning that was published by the Capital Markets Authority (CMA) of Saudi Arabia. In essence, this regulator is making it extremely di�cult for financial services companies to distribute products and services in Saudi Arabia unless they have secured the necessary licence and borne the cost of establishing a physical presence in the country.

This development means that

international asset managers, in particular, who wish to do business in Saudi Arabia – beyond managing segregated mandates for Sovereign Wealth Funds – will need to consider whether the significant expenses of acquiring a license, an o�ce and sta will be justified. However, the companies that are already present gain the benefits from an additional barrier to entry to newcomers. Rare is the regulatory change from which there are no winners, only losers. This is emphatically not such a change.

Nevertheless, we hope that this initiative is not imitated by other regulators in the GCC countries. A similar decision by the Emirates Securities and Commodities Authority (ESCA), for instance, would have a substantial impact on international asset management companies that are doing profitable business with advisers, both directly and through international life companies.

Regulatory change in the GCC countries will be a key topic for the thought leadership roundtables that Insight Discovery will be holding in late 2012 and the first half of 2013.

‘The ‘Arab Spring’ had a substantial impact on Bahrain, but (considerably) less e�ect on the other GCC countries. Nevertheless, well over one third of the advisers interviewed said that they saw the political events of last year as a major challenge’

LIFE INSURANCE

12 13

LIFE COMPANIESLIFE COMPANIES

Who are the international life companies that advisers use?The insurance markets of the GCC countries and, indeed, the broader MENA region are notoriously fragmented

In most countries, there are surprisingly large numbers of predominantly non-life companies that are small by most standards including, in some cases, their home markets. Most of the insurers are owned by family-controlled conglomerates, local financial services groups or government-linked agencies. None of this is true of the market for life insurance products and services that are used by the advisers.

We asked the advisers who use the products and oerings of the international life companies to identify which of the life companies they considered to be the best in respect of a number of aspects. The advisers were asked to discuss: term protection products; whole of life protection products; regular premium contractual investment products; regular premium non-contractual products; lump-sum investment products; corporate savings products; fund range; attractive commission terms; and sales client support. Our observations are as follows:• Thereareonlyaround10internationallifecompaniesthat

are serving advisers across the GCC countries. The main players, in no particular order, include Skandia International, Zurich International Life (ZIL), Friends Provident International (FPI), MetLife Alico, Royal London 360°, Generali, Swiss Life and Hansard.

• Inrelationtoeachaspectthatweaskedtheadvisersto consider, there are at least two international life companies whose shares of the number of mentions as being the best are in double digits. There is no single player that has crushing domination of the entire market. However, there are some products for which one company stands out as been seen to be the best. FPI is seen to be

the leader for term protection products. ZIL is perceived to be the provider of the best whole of life protection products. Skandia International is the stand-out for regular premium non-contractual products and lump sum investment products.

• Takingintoconsiderationthenumberoftimesthatthevarious international life companies were among the three best product providers, we would conclude that ZIL is the overall leader in the market – but not by a large margin. We suggest that the next two most important international life companies are FPI and Skandia in that order.

• Takingintoaccounttheresponsesfromallsurveyrespondents, our impression is that MetLife Alico is the fourth most important player in the eyes of IFAs. However, this company has had very significant success in distributing its products via banks. This matters, because the Middle East Investment Panorama this year is oriented towards investment advisers in the sense that would be understood in the UK. In order to gain a clearer picture of MetLife Alico’s position, we excluded the answers which we had received from respondents who work for investment advisory firms. Among the significantly smaller sample which remained, MetLife Alico was the international life company that was either the most or the second-most frequently mentioned as being the best provider of most the various products. MetLife Alico was mentioned most frequently as the best provider of client support and the second-most frequently for its attractive commission terms.

• InrelationtoproductsandserviceswhereMetLifeAlico

What do advisers want from international life companies?All international life companies deal with advisers across the GCC countries and, indeed, further afield. However, only 63% of advisers deal with international life companies. This suggests that the international life companies could increase the business that they write in the region simply by converting advisers into ‘new users.’ Another approach is to persuade advisers who already promote their products to use these products – or other o�erings – more. Therefore, an obvious question is: what do the advisers actually want?

One of the key findings of the Middle East Investment Panorama in 2011 was that ‘it is important that international life companies maintain a physical presence if they want to do business in the region’. This appeared to be the case ‘because clients and their advisers need more ‘hand holding’ and after sales service in relation to what are often quite complex products’. In other words, ‘personal relationships and face-to-face meetings are central to the way in which advisers secure new clients to whom they can sell the products of international life companies’.

Well over half of all advisers who work with international life companies consider that ‘on the ground’ sales support is of the utmost importance. Over 80% of advisers would include ‘on the ground’ sales support as one of the three most important aspects of the ways in which they can interact with international life companies. Associated with this is the provision of training by the international life companies. In order to sell the products, the advisers need to understand the products so that they can be explained to the advisers’ clients. Over 40% of advisers rate training as either the most important or the second-most important facility that international life companies can provide.

Because of the importance of face-to-face meetings and relationships, the eorts of international life companies to organise corporate/social events are widely appreciated by the advisers. One-fifth of advisers rated corporate/social events as being among the two most important facilities that can be provided by international life companies. One-third said that such events are among the three most important facilities.

More crucially, though, international life companies need to arrange for interaction between the advisers and the investment managers whose skills and products underpin the international life companies’ oerings. Only 13% of advisers rate meetings with the fund managers as being the most important facility that the international life companies can provide. However, over 60% of advisers rate such meetings as being among the three most important facilities.

The meetings should be face-to-face. The number of advisers who consider webcasts and conference calls to be important is barely into double-digits. Although about one-third of advisers believe that the international life company’s website is an important resource, only 8% consider it to be of primary importance. Although most of the advisers who use the products and services of international life companies are satisfied with the companies, they see room for improvement. If asked to mention one aspect that the international life companies could improve, the advisers would highlight digital services/post-sales processing, digital services/pre-sales processing, sales skills training and an expansion in the range of funds and products that are oered. As illustrated in the chart below, each of these factors was mentioned by around 20% of advisers

However, if one takes into account all of the three most important areas for improvement, a dierent picture emerges. Over three-quarters of advisers say that improved technical support is important. About two-thirds identify digital services/post-sales processing as an important area that can be improved. By contrast, this is true of fewer than half of advisers in relation to digital services/pre-sales processing. About half of advisers mention sales skills training or expansion of product ranges as important areas for improvement.

Just as the international life companies need satisfied advisers, so the advisers need satisfied clients. This is because over 75% of the advisers who use the products of the international life companies get new business primarily through referrals from existing individual and corporate clients. Including referrals from family and friends, the number rise to well over 80%. Interestingly, given the complexity of life insurance products, telemarketing is the primary source of new business for 10% of advisers: by contrast, 5% of advisers derive new business primarily through seminars. Virtually none of the advisers rely on social media or PR/advertising to gain new business.

In which of the following areas could international life companies look to improve their o�ering to advisers?

1 | MEIP Survey – August 2012

Sample Size : 105

CHART  2-­‐  Interna/onal  Life  | In  which  of  the  following  areas  could  interna/onal  life  companies    look  to  improve  their    offering  to  advisers?  

22.6%  

21.7%  

21.7%  

18.9%  

15.1%  

17.9%  

15.1%  

11.3%  

18.9%  

36.8%  

27.4%  

12.3%  

22.6%  

12.3%  

25.5%  

Digital  services,  post  sales  processing  

Digital  services,  pre  sales  processing  

Sales  skills  training  

Expanding  their  fund  range  

Technical  support  

Top  Most  Important   2   3rd  Most  Important  

14 15

ASSET CLASSES

How are clients’ exposure to di�erent asset classes likely to change?The advisers that cater to expatriates and corporate clients have long embraced Open Architecture – meaning that they will readily distribute products that are sourced from or ‘manufactured by’ international asset management companies or international life companies from whom they are otherwise completely independent

The advisers have also, for a long time, been exponents of alternative investments. It is reasonable to suggest that their clients have been reasonably receptive to alternative investments: for instance, the clients, by definition, work in emerging markets and have a good understanding of the risks and the opportunities. In the GCC region, manufacturers of Shariah-compliant products also provide savings, investment and protection solutions that are unavailable in much of the rest of the world.

We presented each of the advisers who took part in the Middle East Investment Panorama this year with a list of 16 dierent asset classes. We asked them to indicate whether they allocations that they and their clients would make to each of these asset classes would likely increase, decrease

or stay the same. The answers are summarised in the chart above. Our observations would be as follows:• Totheextentthatadvisersandtheirclientsareusing

investing in the asset classes, they are for the most part happy with their current allocations. In relation to most asset classes, the numbers of advisers who indicate that they and their clients will keep allocations unchanged are greater, and often substantially so, than the number that indicate that they will change allocations – whether upwards or downwards.

• Thisismostobviouslythecaseinrelationtocash,developed markets fixed income and commodities. In these asset classes, about half of all advisers surveyed have exposures and plan to keep them broadly unchanged. In

was not mentioned most frequently by the smaller sample, ZIL was generally the international life company that received the greatest number of mentions. This serves to reinforce our view that, for now, ZIL is the overall leader in the market.

• Othercompaniesareleadersinrelationtoparticularproducts. Examples include Generali for regular premium contractual products and Royal London 360° for whole of life protection products.

• ZILandFPIhaveclearleadershipinthemarketforcorporate life products.

• Intermsofpotentialfordevelopingnewbusiness,FPIandZIL are best placed, because each of them is considered by over 30% of advisers to be the best in terms of client support. As is noted elsewhere in this report, ‘on the ground’ support is of paramount importance to the advisers. Skandia was mentioned by nearly 20% of advisers as being the best for sales support.

• Allthreeofthesecompanieshavereinforcedthebenefitsof superior sales support with attractive commission terms. This is particularly true of ZIL, which is seen as oering the best commission terms by well over one-third of all advisers

(or about the same number as those who feel similarly about FPI and Skandia combined).

• LifeInsuranceCorporation(International),thesubsidiaryofthe gigantic government-owned life insurance company in India, accounted for over 40% of life insurance premiums written in Bahrain in 2010. It appears not to be working with advisers.Of the advisers that use the products and services of

international life companies, 70% believe that there is room for other companies to enter the market place. We asked these advisers to identify which is the international life company that is not yet present but which they would most like to see in the market. Four companies were each nominated by more than 10% of the advisers. These were Prudential plc (17%), Standard Life (15%), Manulife (13%) and Sun Life Financial (11%). What these UK and Canada-based companies have in common is a strong presence in Hong Kong and, with the exception of Standard Life, a broad geographic footprint across East and Southeast Asia. They would be well known to many of the advisers and, we suspect, the advisers’ clients. Interestingly, AIA, another multi-national life group with a very substantial business in Hong Kong, was not widely mentioned.

AXA, which is already one of the larger regional non-life companies in the MENA region, was identified by 7% of advisers as the company that they would most like to see enter the market. Allianz, Transamerica and New York Life were mentioned by 4%-6% of advisers. Intriguingly, 4% of the surveyed advisers nominated MetLife Alico as the company they would most like to see enter the IFA market, plans which we undertand are well advanced. Over one-fifth of advisers identified companies other than the ones named.

MEIP 2011 v MEIP 2012Over the last year or so, it seems that a main change that has taken place is that a greater number of advisers are using the products and services of the international life companies. In 2011, we found that about half of the advisers were actually doing business with the international life companies. As noted above, the number this year is 63%. Even allowing for the dierences in our samples, it would appear that the international life companies have had significant success in converting non-users of their oerings into new users.

Perhaps it would be more accurate to say that particular international life companies have had success in this area. Last year, we concluded that ZIL, FPI and Skandia International were the three largest providers of international life solutions. Our impression was that Generali was in fourth place. As noted elsewhere, we now believe that MetLife Alico is the fourth-largest player – although Generali is clearly a leading provider of particular products.

In both 2011 and 2012, advisers emphasised the importance of international life companies’ having a presence ‘on the ground’. In both years,

advisers also stressed that it is important for the international life companies to provide access to the fund managers who run the investment vehicles that underpin the international life companies’ oerings.

Overall, it appears that advisers are about as satisfied with the products and the services of the international life companies as they were last year. In both Middle East Investment Panoramas, we asked the advisers who use international life companies’ products and services to indicate their level of satisfaction from one (extremely unsatisfied) to 10 (extremely satisfied). In both years, the median score is seven.

‘Of the advisers that use the products and services of international life companies, 70% believe that there is room for other companies to enter the market place’

LIFE COMPANIES

2 | MEIP Survey – August 2012

Sample Size 212

CHART  3-­‐  Investments  | Your  Company  or  clients’  exposure  to  investment  strategies  over  the  next      12  months-­‐  will  it  increase,  decrease  or  stay  the  same?

49.4%  

46.2%  

43.4%  

41.7%  

38.2%  

32.2%  

31.7%  

30.5%  

28.0%  

27.0%  

26.5%  

25.7%  

21.3%  

18.3%  

17.4%  

14.5%  

40.9%  

42.0%  

38.2%  

49.7%  

41.8%  

47.0%  

41.3%  

51.4%  

49.6%  

49.4%  

58.7%  

56.3%  

43.3%  

56.9%  

46.1%  

56.4%  

9.7%  

11.8%  

18.4%  

8.6%  

20.0%  

20.8%  

27.0%  

18.1%  

22.4%  

23.6%  

14.8%  

18.0%  

35.4%  

24.8%  

36.5%  

29.1%  

Equity  strategies-­‐Global  emerging  markets  

Fixed  interest-­‐Sukuks  

Other  strategies-­‐Structured  products  

Fixed  interest-­‐Global  emerging  markets  

AlternaUve  strategies-­‐Gold  

AlternaUve  strategies-­‐Real  estate  

AlternaUve  strategies-­‐Private  equity  

Equity  strategies-­‐Shariah  compliant  equiUes  

Fixed  interest-­‐GCC  funds  

Other  strategies-­‐Cash  

AlternaUve  strategies-­‐Other  commodiUes  

Fixed  interest-­‐Global  developed  markets  

AlternaUve  strategies-­‐Hedge  fund  of  funds  

Equity  strategies-­‐GCC  stock  exchanges  

AlternaUve  strategies-­‐Hedge  funds,  single  strategy  

Equity  strategies-­‐GCC  funds  

Increase     Maintain     Decrease  

Asset allocation trends over the next 12 months – will your clients’ exposure to the following strategies increase, decrease or stay the same?

16 17

ASSET MANAGERSASSET CLASSES

What do advisers want from international asset managers?One of the reasons why the GCC countries collectively represent an attractive market for international asset management companies is that Open Architecture thrivesMuch of the business that is actually generated in the region comes from expatriates, via advisers who usually have limited capacity to undertake day-to-day investment management decisions themselves.

Sometimes the advisers distribute products to their clients which are ‘manufactured’ by international life companies, but which are underpinned by funds and/or other oerings that are sourced from international asset managers. As we discuss elsewhere in this Middle Eastern Investment Panorama, the international life companies are also keen exponents of Open Architecture in fund distribution. Obviously it is important for an international asset manager that operates in the region to have a relevant product range, which includes, for instance, suitable global emerging markets oerings. But, how can an international asset manager dierentiate itself from another company which has a similar product range?

We asked each of the advisers who participated in the Middle Eastern Investment Panorama this year to identify the level of importance from one (most important) to five

(or less important) to each of nine dierent criteria by which international asset managers are selected. If the advisers considered a selection criterion to be unimportant, they did not have to rate it at all.

As usual, fund performance remains the most important selection criterion overall. It received a score of one or two from 53% of advisers. A further 34% assigned a score of three, four or five to investment performance. About one-eighth of the advisers, though, did not mention investment performance as a selection criterion. The advisers were asked to quantify the time period over which they consider performance. Slightly less than one-fifth indicated each of five years and three years. Another 12% indicated that they consider performance over 12 months or less. Over half, however, indicated that they consider performance over all of the dierent periods that were identified.

The reputation of the fund or fund manager also remains crucial. This criterion received a score of one or two from 43% of advisers. A further 40% gave a score of three, four or

relation to hedge funds (be they funds of funds or single strategy products), GCC funds, GCC exchange-listed stocks and Shariah-compliant stocks, the numbers of advisers who have exposures that are likely to be maintained are smaller (at 28%-36%): however, in almost all of these instances, these advisers are more numerous than those who are looking to increase or reduce exposures.

• Inthemajorityofcases,thenumbersofadviserswhoare looking to increase exposures exceed those who are looking to reduce exposures. Put another way, the norm is for advisers (and clients) who are bearish about a particular asset class to have no exposure at all. The main exceptions are hedge funds, GCC funds and GCC exchange-listed stocks: in these four asset classes, the bears outnumber the bulls – and by a quite a margin.

• Thehardnumberssupportthepropositionthattheadvisers and their clients have an a�nity with emerging markets equities and bonds. Virtually all the advisers have some exposure. Only 9% of advisers have an exposure to emerging markets equities that they are looking to reduce. Only 8% of advisers have an exposure to emerging markets fixed income that they envisage cutting. Structured products are used by over four-fifths of all advisers. However, 15% of all advisers indicate that they and their clients will be using structured products less in the coming year or so.

• Sukuks–bondsthatarestructuredinsuchawaythattheyare compliant with the precepts of Shariah – are used by about two-thirds of all advisers. Sukuks stand out among all the asset classes considered, because the number of advisers who use them and who are looking to trim their holdings is the smallest – at less than 8%.

• Goldistheassetclassaboutwhichthereisthegreatestdiversity of opinion. Gold bears include 18% of advisers who have an exposure which they are looking to reduce, as well as another 10% who have no exposure at all. Conversely, 34% of advisers can be considered gold bulls, in that they have an exposure which they are looking to increase. The largest single group, though, are the 38% of advisers who have an exposure to gold that they are looking to keep unchanged.

• Cash,too,hasitsproponentsanddetractors.Inspiteofinterest rates that are, and which are likely to remain, low, a quarter of all advisers plan to increase their holdings of cash in the coming year. Conversely, and in spite of the low risks associated with cash, more than one-fifth of all advisers expect to reduce their exposure in the next 12 months.

• Abouttwo-thirdsofadvisershaveexposurestoprivateequity and GCC fixed income funds. However, among these advisers, the numbers who are looking to change the exposures (in either direction) are relatively large. The implication is that international asset managers who

wish to transact substantial business with advisers in the GCC countries should have attractive oerings that focus on emerging markets equities and emerging markets debt. In particular, they should have global emerging markets products – which are the preferred vehicles for 57% of advisers. Another 15% of advisers say that they prefer single country emerging markets funds, while an additional 13% indicate that they prefer regional funds. The remainder indicates that they prefer separately managed accounts or emerging markets related thematic funds

Ideally, the international asset managers’ product range should also include a cash management product, along with developed bond funds. For asset managers who are promoting expertise in alternative asset classes, the greatest opportunities lie with funds that focus on gold and commodities, followed by (listed) real estate. By contrast, a majority of advisers have no interest in hedge funds or are reducing their positions. Most advisers are similarly disinterested in GCC stocks and bonds.

MEIP 2011 v MEIP 2012The comments from the advisers in relation to the asset classes to which they and their clients are exposed are very consistent with those made by a dierent sample of individuals in the Middle Eastern Investment Panorama in 2011. Then, as now, emerging markets

equities and bonds were the ‘hot’ asset class. About half of advisers preferred global emerging markets products, while most of the rest favoured single country or regional funds. In 2011, it was also apparent that most advisers had little or no interest in hedge funds and GCC securities. However, there was a reasonably strong/improving appetite

for most types of alternative investments other than hedge funds. Demand for cash and developed market fixed income appears to have improved somewhat over the last 12 months: this could well be because of a characteristic of the advisers’ clients on which we remarked last year – their preference for certainty ofinvestmentreturns. •

‘The hard numbers support the proposition that the advisers and their clients have an a¦nity with emerging markets equities and bonds’

18 19

ASSET MANAGERSASSET MANAGERS

Who are the international asset managers that advisers use?No fewer than 84% of advisers in the GCC countries use the products and services of international asset managers

These advisers access the international asset managers’ oerings in four ways. Over one quarter – 29% – buy funds directly from the international asset managers themselves. The same percentage buy indirectly, through ‘mirror’ funds that are oered by international life companies. A slightly smaller number – 28% buy funds directly through platforms that are run by the international life companies. The remaining 14% of advisers buy funds through private banks or other proprietary platforms.

The implication for international asset managers that have ambitions to do business in the GCC countries is that the advisers, collectively, represent an attractive opportunity. However, international asset managers who wish to maximise the likelihood of commercial success across the region need also to deal with other fund distributors – and, in particular, the international life companies. Private banks and other owners/operators of proprietary platforms are also too important to be ignored.

When we asked advisers to indicate whether or not fund ratings are important, 88% said yes and 12% said no. The ratings agencies which they indicated as the ones that they value the most are Morningstar/OBSR and Standard & Poor’s (S&P): each of these agencies was named first by over 35% of advisers. Around 7%-8% of advisers named each of Trustnet, Fitch and Lipper. As we note elsewhere in this report, only 55% of advisers actually regard independent fund ratings as an important criterion by which managers/funds are selected. We would reconcile the numbers by observing that nearly all advisers think that independent fund ratings are important for advisers (and, presumably, other distributors) as a group: however, well over one-third of the advisers who feel this way

do not themselves consider ratings when they are actually in the process of selecting a fund/manager.

We asked the advisers to name the international asset managers with whom they had actually had dealings over the last 12 months. Over half mentioned each of BlackRock, Franklin Templeton, JP Morgan Asset Management, Fidelity, Schroders and Invesco. Between one-third and one-half of advisers indicated that they had actually dealt with each of HSBC Global Asset Management, Aberdeen, Emirates NBD and Threadneedle. Most of these companies were frequently mentioned as being the providers of the best support to advisers over the last year. Natixis stands out as a company that does not appear to have been widely used by advisers, but which is highly rated for its support by those that do actually have dealings with it.

As noted above, the vast majority of the advisers come from two countries – India and the UK. The advisers from the UK could be expected to have arrived in the GCC countries with detailed knowledge of many of the international asset management companies that are doing business in the region: we therefore thought that it would be more useful to focus on who are the international asset management companies whose products and services are being used by the advisers from India. Nearly two-thirds of the Indian advisers said that they had used the products and services of Franklin Templeton in the last 18 months. Just over 60% said that they had used the products and services of BlackRock. The figures were lower – at a little under one half – for Invesco, Fidelity and JP Morgan Asset Management. The obvious conclusion is that Franklin Templeton stands out for the success it has had in promoting its products and services to advisers who are serving Non-Resident Indians.

five to investment performance. This means that the number of advisers who did not mention fund/manager reputation as an important selection criterion was 17%.

It appears that there are between one-third and one-quarter of advisers who do not worry about the investment process or the stability of the investment team – provided, it must be presumed, that the past performance and the reputation of the fund/manager are good. On balance, it appears that the stability of the investment team (which received a score of one or two from 32% of advisers) is more important than the process itself (which was similarly rated by 25% of advisers).

Independent fund ratings are undeniably important to a minority of advisers. Slightly less than one-fifth – 18% – assigned a score of one or two to ratings. Another 37% gave a score of three, four, or five. By deduction, though, it appears that independent fund ratings are fairly unimportant to 45% of advisers – or a little less than half of the total.

It appears that the vast majority of advisers are not overly concerned with the fees that are charged by fund managers,

providing that other criteria are met. Just over 11% of advisers gave a score of one or two to fees. Another 41% assigned a score of three, four or five.

Similarly, most advisers are not particularly worried about the support that is available from fund managers for the advisers’ clients or, through on-the-ground sales/marketing personnel, to themselves. Fewer than 10% of advisers assigned either of these criteria a score of one or two. Less than one-third gave either of these criteria a score of three, four or five. In this respect, the advisers’ view of fund managers is very dierent to their views of international life companies. As we explain elsewhere, most advisers believe that it is essential for the international life companies with whom they work to have an on-the-ground presence.

The advisers understand that investment management is an industry in which activities are often outsourced. Indeed, where fund managers are oering multi-manager products, this is even true of investment management itself. Unsurprisingly, the number of advisers who regard the level of outsourcing undertaken by a fund manager as an important selection criterion is very low – at about 8%.

Ideally a fund manager that is looking to distribute its products to and through advisers in the GCC countries will have good investment performance and a good reputation. However, the comments from the advisers in this year’s Middle East Investment Panorama suggest that having either good investment performance or a good reputation will su�ce. In a situation where a fund/manager meets only one of the two most important criteria, it helps to have clarity in the investment process and a stable investment team. However, the investment process and team stability perhaps matter less in the GCC countries than in other parts of the world. Independent fund ratings, fees and – above all – the level of outsourcing are of moderate-to-low importance overall.

MEIP 2011 v MEIP 2012The comments from the advisers in relation to the selection criteria that they use to choose funds/managers suggest that the criteria have changed little over the last year or so. Last year, we suggested that ‘an international asset manager which cannot demonstrate excellence in terms of investment-related factors can still do good business in the GCC (or MENA) countries’. We also observed that it was not necessary for international fund managers – in

contrast to international life companies – to have an on-the-ground presence. Last year, the other criteria that are not investment-related (e.g. fees and the level of outsourcing) were also clearly unimportant.

In 2011, we found that ‘there is absolutely no agreement on the issue of the payment of extra commissions. A large minority of advisers – 44% – believe that the enlarged commissions are a negative development. A much lower number – 22.0% see the higher commissions as a positive development.

However, over one third – 33.9% - have no view either way.’ This year we asked advisers a similar question: what is the influence of soft commissions on the fund selection process? Over one third – 37% – said that soft commissions had no influence on the fund selection process. A marginally greater number indicated that the commissions have an influence, but that their overall impact is neutral. The remainder said that the commissions have a big influence on the process (16%) or were unwilling to provide an answer (9%).

‘It appears that there are between one third and one quarter of advisers who do not worry about the investment process or the stability of the investment team – provided, it must be presumed, that the past performance and the reputation of the fund/manager are good’

MEIP 2011 v MEIP 2012Natixis stands out as the international asset manager which has over the last 12 months developed a significant business – notwithstanding that it appears to be dealing with a minority of advisers across the GCC region. Otherwise, the comments that we received from the advisers in relation to the international asset managers whose products and services they are using are broadly consistent with those that we received

last year (and, indeed, in the Gulf Professional Adviser Survey – GPAS – that we undertook in 2010).

Overall, it appears that the advisers are about as satisfied with the products and the services of the international life companies as they were last year. In both Middle East Investment Panoramas, we asked the advisers who use international asset managers’ products and services to indicate their level of satisfaction from one (extremely unsatisfied) to 10 (extremely satisfied). In both

years, the median score is seven. One important change is that international life companies have become more important as distributors of the products and services of the international asset managers. In 2011, we found that two-fifths of advisers were dealing directly with the asset managers. As noted above, the number has fallen to 29% this year. The numbers of advisers who buy funds or ‘mirror’ funds through the international life companies’ platforms have increased correspondingly.

20 21

WHAT ARE THE HARD NUMBERSWHAT ARE THE HARD NUMBERS

using UK Self Invested Pensions to accumulate retirement saving as these products provide a cost-eective regular saving solution to tax-e�cient wealth building.

As a part of its research, New Dawn Consultancy looked at the independent financial advisers who are serving expatriates across the Middle East and who see QROPs and Qualifying Non-UK Pensions (QNUPs) as key oerings. New Dawn Consultancy identified 13 advisory firms providing integrated retirement advice (including QROPs and QNUPs) through 25 o�ces in the region (the number of which has increased from 19 since 2010).

The market for pension transfer products is too large to be ignored. In 2011-12, advisory firms earned £72.9m in commissions from sales of pension transfer products globally. Given the findings of New Dawn Consultancy’s research, it is reasonable to suggest that around £17m of this relates to the sale of pension transfer products in the Middle East. This number can be expected to grow if economic and political conditions across the region remain benign, as we expect. Larger economies need more expatriate workers.

The number can also be expected to grow if hard times

return – if only temporarily – and there is a surge in the numbers of expatriates who are seeking to leave the GCC countries. QROPs and QNUPs are very convenient vehicles with which the expatriates can take their accumulated savings with them.

So how many advisers are there?The definition of adviser that we use in the Middle East Investment Panorama is broader than the concept of independent financial adviser as would be understood in the UK. We know that independent financial advisers, private bankers and financial planners with banks are working in each of Qatar, Bahrain, Oman and Kuwait. However, the total number across these four countries is probably no more than than several hundred .

Provision of financial advice by foreigners in Saudi Arabia has essentially been banned for years. The Capital Market Authority’s latest (mid-September 2012), and aggressively-worded, edict – about the provision of products and services by companies that do not have the expensive licence and physical presence in the country – complicates matters even further. However, we do know that some of the local banks in Saudi Arabia have been providing private banking services. The bottom line is that the number of independent financial advisers in Saudi Arabia is very small relative to the overall size and importance of the economy.

The overwhelming majority of the independent financial advisers in the region can be found in the UAE. This is partly because of the absolute size of the economy. It is partly because of the development of Dubai as a regional business and financial hub. It is also because of what has, to date, been a reasonably liberal and flexible regulatory environment.

Having spoken to several leading international asset management and life companies we have estimated that the total number of advisers working in the UAE is around 3,700. This is a far bigger number than previously estimated, and, it could be argued implies that the sector is over advised. It also adds weight to calls for increased regulatory approval and supervision of advisers.

Within the UAE we believe there are 1,050 independent financial advisers, 650 private bankers (from both international and local banks) and around 2,000 advisers working for banks in the UAE. The three largest independent advisory firms in the UAE, and the approximate numbers of advisers that they employ, are as follows:

Firm Number of advisers in the UAENexus 280deVere 125Global Eye 80

Other large firms include Acuma, Holborn and Mondial, who all operate from Dubai.

International asset management companiesThe exact size of the opportunity for international asset management companies which wish to do business with the various Sovereign Wealth Funds (SWFs) of the GCC countries will probably never be known. This is partly because some governments regard the details of what their SWFs are doing as state secrets. We also suspect that it is because certain leading international asset management companies do not want prospective clients in the region to know how much money they already handle for SWFs. It is also possible that other international asset managers who might reasonably be expected to be substantial managers of segregated mandates for the SWFs would prefer that it not be known how little they handle.

According to the Sovereign Wealth Fund Institute, the total assets under management (AUM) of all SWFs at the end of June amounted to US$5,019bn. SWFs that are based in the Middle East accounted for 35% of this. The four largest GCC region SWFs – Abu Dhabi Investment Authority, SAMA Foreign Holdings, Kuwait Investment Authority and Qatar Investment Authority – together had AUM of about US$1,556bn. Assuming that the world’s leading asset management companies manage around one-third of this money (with the rest being handled by in-house teams), it is reasonable to suggest that they are running somewhere around US$600bn in segregated mandates for SWFs that are based in the GCC countries. On the basis of details that were provided to us in confidence by various parties, we believe that there are three leading international asset management companies that each manages US$70bn or so for SWFs based in the GCC countries. Two of these companies are well known for their expertise in index funds.

We further believe that the largest active money managers in the world typically manage between US$10bn and US$20bn for institutional investors in the GCC region. There are also numerous, more specialised, managers who manage less than US$10bn, focusing on particular areas such as emerging markets debt or funds of hedge funds.

QROPs and QNUPs: What happens when the expatriates arrive or go home?It is clear that there is a substantial opportunity in the GCC countries for international asset management companies who wish to distribute their products and services to advisers – whether directly or through international life companies. Further, it is obvious that the advisers are predominantly serving expatriates from South Asia and the UK. These expatriates are looking to accumulate wealth – although not necessarily for retirement – before returning home.

According to New Dawn Consultancy (www.newdawn-consultancy.com), a key development was the introduction of the UK’s Qualifying Recognised Overseas Pension (QROP) regulation in 2006. This regulation facilitates the transfer of UK

pension rights by people who are resident outside of the UK and include British expatriates and foreign nationals with UK pension assets.

Research in July 2012 found that just over one quarter of all pension transfers from the UK (excluding transfers to Ireland, Australia and New Zealand) were by people who were working in the Middle East. The research found that people in the Middle East, who were transferring their UK pensions, were typically aged between 36 and 49: almost all were fully employed. The average pension transfer was typically £131,000. This is about 25% lower than the global average: the reason for this is that the UK citizens (or Commonwealth citizens with strong links to the UK and the UK pension system) were typically about 10 years younger than the overall average and as such had less time to accumulate assets.

New Dawn Consultancy found that most of the individuals who were looking to transfer their UK pensions were motivated primarily by the desire to accumulate wealth of which retirement provision was a key consideration. Most of the money was transferred as lump sums, which were then invested in QROPS. Alternately expats in the Middle East are

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Afterword – some general observations

After such an exhaustive study of the financial services industry in the GCC region, it is possible to make some general observations. Exceptions will of course exist in particular circumstances, but will usually serve to reinforce the rule. The industry is maturing and becoming more sophisticated.

Under the positive encouragement of regional governments, especially in the UAE, financial services are steadily adopting global standards. This partly reflects the increasing penetration of international asset managers and life companies, but also underlines the increasingly global outlook of advisers and clients.

Overall, advisers are pretty optimistic about the future, and, after four years of post-crisis experience, understand better the principles of risk in a volatile global financial environment. Many have already arrived at the conclusion that the old world view of investment – a solid, dependable West versus a riskier East – no longer applies.

Inevitably, there are reservations. The research by Roubini Global Economics (see page 24) highlights one in particular: as advisers’ and clients’ orientations have tended eastwards, so the potential for negative influences from Asia have

increased. For example, the GCC would feel the eects of a slowdown in the Chinese economy more than it would a further deterioration in the euro area.

A second cloud on the horizon comes in the form of regulatory uncertainty in the region. There have been positive moves to encourage the standardisation of financial service provision across the GCC, but this trend is threatened by the kind of action taken recently by the Capital Markets Authority in Saudi Arabia. If other GCC states follow the Saudi example, it could lead to a new protectionism in the industry to the detriment of all.

Finally, advisers have to continue to learn the lessons of the past four years. In this respect, the emergence of highly leveraged single bond issues, usually in UAE and Indian companies, is a worrying development that could lead to regulatory friction. The clients who are being advised to invest in these products have to be made aware of the charges and the risks.

The GCC financial services industry remains under the category ‘work in progress’, but the progress is undeniable. Nigel Sillitoe

Insight Discovery

LEADERSHIP THOUGHT ARTICLESAFTERWORD

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A new approach to equity investing: Amundi’s Next GenerationThe past ten years have had dramatic consequences on risk perception among the investment community. The market drawdowns that followed the TMT bubble and the financial crisis have contributed to dampen investors’ willingness to take risk. The end of the great moderation cycle where monetary and fiscal policy could be used to smoothen the economic cycle might prove them right, as we should expect the deleveraging of the developed economies to be bumpy.

With interests rates at historical lows and inter asset-classes correlations spiking, the picture for investment professionals has rarely been so bleak. Investors need more than ever to capture an equity risk premium but have limited risk budget. Investors need diversifying solutions but opportunities seem sparse.

Amundi’s Next Generation strategies seek to address these legitimate concerns. They oer equity exposure, but do so with a reduced risk budget. They are diversifying solutions because they tend to behave very dierently from more traditional equity strategies. These unique characteristics of risk reduction and equity premium diversification are achieved in dierent ways.

The first available method focuses on alternative stocks weighting scheme. Most equity portfolios are indeed managed by overweighting or underweighting stocks with respect to their weight in a given index such as the S&P 500 or the MSCI World. Consequently, most equity portfolios tend to behave rather similarly to their benchmark.

Equity benchmarks are usually capitalization weighted, meaning that the weight of each stock in the portfolio is proportional to the market capitalization of the company. This construction scheme results in highly biased portfolios with large concentration of risks on a limited number of large cap stocks. Consider the MSCI World. While it contains more than 1600 stocks, 10% of the total risk comes from only 10 stocks, that is to say 10% of the investors risk budget is consumed on 0.6% (10/1600) of the investable universe. Risk is expensive and should not be spent on a few companies but rather be spread out on as many uncorrelated risk factors across the investment

universe. This is what Next Generation strategies seek to achieve. In these strategies, the weight of each stock does not depend in any way on its weight in a benchmark, but is rather chosen to oer a portfolio with a high return to risk ratio.

Equity exposure with risk reduction can also be reached through options’ based processes. Amundi has developed a strategy that relies on options market to oer a portfolio that participates fully in an up-trending market while participating only partially in a down-trending market. Over the long term, this type of strategies therefore outperforms a traditional capitalization weighted portfolio while reducing the volatility of the investment.

All in all, Next Generation strategies address two distinct but nonetheless related issues of the investment community. The first is an increased need for risk control. It is getting harder by the day for investment professionals to justify their reliance on the procyclical, high risks/high biases traditional indexes. Contrary to what the theory states, more risk does not result in more return in the equity market and we can therefore build portfolios with reduced risk and long-term outperformance. Secondly, Next Generation strategies oer equity diversification at a moment where correlations are very high and investors desperate for uncorrelated risk premia. These two distinctive characteristics will make Next Generation strategies increasingly popular in the coming future.

LEADERSHIP THOUGHT ARTICLES

Mapping MENA risks and opportunities in a world of uncertaintyRachel Ziemba, Director of CEEMEA and Global Macroeconomics

Despite the region’s wealth, MENA remains exposed to downside global risks

– particularly in the biggest poles of global output (US, Europe) and growth (China, Asia and other EM). Slower global growth and demand will dierentiate the regional economies, with capital flowing to the countries that have the most economic flexibility, clearest regulatory regimes, government capacity to stimulate or largest domestic markets. Deleveraging will weaken global growth and boost savings to the detriment of investment, forcing many regional players to rely on their own resources, while also holding investment returns low. Roubini Country Risk’s systematic model highlights the resilience, competitiveness and growth opportunities in the MENA region, preferring the UAE, Oman, Qatar and Saudi Arabia among oil exporters, and Jordan, Morocco and Tunisia among importers.

Oil prices remain the key transmission mechanism of global demand and risk appetite to the MENA region, even for the hydrocarbon importers in the region, as stronger demand from oil exporters feeds through into their neighbors through imports, job creation and investment. Gradual exits from the Eurozone (EZ), sluggish growth in the US and collapse of Chinese investment are part of RGE’s baseline – capping global growth at about 3% in 2013 and likely lower in 2014. We see the MENA region expanding just under 4% in 2012-13, among the strongest regions. The GCC would be able to handle a moderate shock from the EZ, than a demand shock from China.

North Africa remains more exposed to Europe. China’s shift in demand will bring a demand shock (more problematic to base metal producers than oil and gas exporters). Liquidity tightening from either shock will hit oil importers hardest (their fiscal and external deficits are nearing crippling levels) while demand for oil and gas could slow slightly in the short-term before stabilizing. Moreover, a slowing China will look to increase market share, dumping products – good for countries seeking cheap goods, less good for those trying to compete with Chinese producers.

Roubini Country Risk’s model highlights overall economic competitiveness and medium-term growth potential – the smaller, richer oil exporters in the GCC remain the strongest prospects, as reforms have improved capacity for innovation and human resource potential, while the larger economies in North Africa have fewer resources (current production and past savings) to stimulate domestic demand and insulate them from global demand trends. The strengthening of macroeconomic and political institutions will help these countries move up in investment attractiveness.

Rachel Ziemba heads macroeconomic analysis on the Middle East at Roubini Global Economics and is an expert on the allocation of sovereign wealth globally. This piece draws on RGE macro strategy work as well as Roubini Country Risk’s Quantitative Country Analytics (QCA), a systematic model that draws on publically available data for over 170 countries to map country risk and uncover investment opportunities. For more information, please consult Roubini.com or countryrisk.com. To register for the full report please visit www.insight-discovery.com or send an email to info@insight-discovery.com

Summary of macroeconomic and investment prospects for GCC countriesCountry Positives Negatives

UAE Extensive cushion, business environment among EU financing links, increasing reliance on hydrocarbon best in world, low indebtedness output, rising pockets of debt, limits new credit.

Saudi Arabia Good cushion of liquid assets (though not massive per Innovation low, weak governance and increasing capita), improvement in business environment, extensive reliance on government, fiscal policy unsustainable oil reserves, low indebtedness, space to extend credit

Qatar Extensive FX cushion, albeit not very liquid, diversified income base Limited labor supply, moderate worsening of business (oil and gas), high innovation, infrastructure, government capacity environment, exposed to EZ banks

Bahrain Strong business environment, innovation capacity, Fiscal regime weak, rising indebtedness, exposed to global infrastructure, diversification of economy, financial depth deleveraging, political pressures, low oil and FX reserves

Kuwait Extensive fiscal space, high savings per capita (though Low innovation, weakest infrastructure, business implementation issues) environment, in GCC, low diversification, political stasis

Oman More diversified economy, improvement in business environment, Relatively low innovation, very exposed to Chinese low reliance on external finance, investment in oil recovery techniques demand (30% of exports)

The table above draws on inputs from Roubini Country Risk metrics, as described below, as well as other macroeconomic metrics gathered by Roubini Global Economics. Blue = Average country strength Green = strong investment prospects

‘Amundi has developed a strategy that relies on options market to o�er a portfolio that participates fully in an up-trending market while participating only partially in a down-trending market’

LEADERSHIP THOUGHT ARTICLES

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Illuminating investing worldwideMutual funds are fantastic financial products, which are increasingly being used by advisers in the GCC, either directly or indirectly by life platforms. Funds allow investors to access the security selection of managers with expertise across the equity and fixed income spectrums. When an investor entrusts money with an asset manager, trust plays a critical role. The highest standards of transparency should be adopted in order to maintain that trust over time.

There are many ways for the asset management industry to raise the level of transparency, and a good starting point is the disclosure of portfolio holdings. Investors tend to hold many funds, so portfolio holdings information is crucial in understanding how they interact. This information also helps the investor understand the level of risk for each fund, and over time, whether or not the fund still contributes to their investment objectives.

To achieve that, it’s paramount to go well beyond the disclosure of the top 10 holdings, a common practice in the industry. Investors must know the portfolio’s complete holdings. The fund’s annual report contains that information, but because it is only disclosed once a year, there is often a considerable time lag that makes it di�cult for investors to use the information.

A legitimate concernFund managers may not to want to disclose their most recent investment decisions, particularly when trading less liquid issues, which could harm their execution and ultimately the fund’s returns. While a legitimate concern for some funds, there is certainly considerable room for improvement in today’s disclosure. In the US, for instance, portfolio holdings must be disclosed on a quarterly basis and with a maximum lag of 60 days after the end of each quarter. While the former is a legal minimum, many asset managers have opted for a monthly frequency with a one month lag (sometimes with no lag). These include some of the largest managers in the world who, given the scale of their assets, are among the most concerned about avoiding front-running and keeping trading costs low. That even these mangers are able to provide regular, monthly disclosure is a telling point. Further, such disclosure has not prevented good managers from producing superior risk-adjusted returns for long-term investors.

Another area where disclosure could be improved is on fund managers’ personal investments in the portfolios they run. Our research has shown a significant relationship between the manager’s personal investment in the fund and its risk-adjusted performance over time. After all, it is legitimate to ask if the chef eats his own cooking. This information gives a clear signal of confidence to an investor

considering a new fund but also, and perhaps more importantly, in times of short-term underperformance. It also helps ensure that the manager’s interests are aligned with those of the investors in his fund.

At a time when discussions on bonuses are quite virulent, it seems reasonable to require more transparency on the mechanisms used to calculate variable compensation for fund managers. There should be some relationship between the compensation policy and the time horizon of the fund managers’ investment decisions. At Morningstar, we believe that bonuses based on three to five-year periods should encourage the development of long-term-oriented investment strategies. On the other hand, shorter time periods in bonus calculations can incent managers to take large short-term risks as they know they will not be penalized for this except for a short period. It can also encourage more rapid-trading, which implies higher trading costs to fund investors. At some asset management firms, performance plays a minor role in calculating bonuses. Instead bonuses may be tied to the managers’ eorts to improve relationships with distribution channels, in which case it’s reasonably clear that asset growth is favoured over long-term results, which is something we view as a poor practice not in keeping with the interests of fund investors. Ultimately, the decision on how to compensate its managers should be determined by the asset management company according to its own priorities and objectives. That said, we think investors have the right to know that information. With such disclosure, it’s likely that fund managers’ compensation would evolve towards a system that would better align their interests with those of fundholders.

Enhancing transparencyIn their eort to enhance transparency, fund companies should also pay close attention to the quality and utility of the information they give. Unfortunately, the content of management reports doesn’t tend to be very useful. A vague comment on the evolution of markets and the macroeconomic environment does not help the investor understand the nature of a financial product. Commentary on the fund’s performance versus its benchmarks over the past quarter also fails to educate investors on the merits of the strategy. Thoughtful communication that explains the management strategy, why certain securities are selected, and how they’ve performed is much more valuable. When the strategy and risks of a fund are clearly explained, the case may not appeal to all potential investors. But by failing to do so at all, an asset manager takes the bigger risk of disappointing fundholders. Thomas Lancereau, CFA

The Case for Emerging Market DebtLeading benchmarks of emerging market (EM) debt, such as the J.P. Morgan Emerging Market Bond Index Global, performed very strongly in the early part of 2012 and have held up reasonably well despite a rise in risk aversion among investors. Investors’ enthusiasm for the asset class is not surprising to us when considering the relatively strong position of the economies of many emerging countries and the significant yield premium that many EM bonds currently oer over their developed-country counterparts.

Indeed, EM debt seems increasingly likely to figure in investors’ calculations as emerging markets’ share of capital markets catches up with their contribution to the global economy, itself forecast by institutions such as the International Monetary Fund (IMF) to rise dramatically. In terms of economic growth, emerging markets have consistently outpaced developed countries since 2000, with the resulting state revenues translating in many cases into a relatively healthy fiscal position.

Improving credit qualityThe 2008/2009 global financial crisis has brought into sharp focus the relative strengths of EM economies and we believe their share of global gross domestic product (GDP) is likely to continue to increase at the expense of developed countries. An expanding middle class with rising disposable incomes in many emerging markets has fuelled the rapid growth of domestic demand and intra-regional trade, again forecast by the IMF to be a multi-year trend. Over the past decade, liquidity in EM markets has substantially improved as both the variety of investment opportunities and the investor base has broadened. Furthermore, the sizable foreign currency reserves built up by many emerging markets have helped their currencies to appreciate, boosting returns for investors in developed markets, with potential for further gains if this was to continue.

It has taken time for EM debt to move into the mainstream investment universe. EM sovereign issuers used to be mostly sub-investment grade, based on their weak government finances and poor institutional governance. But successive crises—most significantly, the 1998 Asian crisis—prompted many developing countries to favor export-led growth and switch from fixed to floating exchange rates, allowing them to amass foreign exchange reserves and reduce their vulnerability to short-term market fluctuations. The success of these fiscal and monetary policies has been clear, with a number of EM countries not suering a recession at all during the 2008/2009 global financial crisis. The average

credit quality of EM sovereign bonds has steadily increased, from an average which stood below BB+ in 2001 to one around BBB in 2011 in stark contrast with the downward trend of developed market ratings.

In aggregate, emerging markets now only have around a third of the debt of their developed peers. A significant number of EM countries and companies hold investment-grade credit ratings, and all three J.P. Morgan EM debt indexes are currently rated at investment grade. Indeed, the stability and improved fundamentals of many EM sovereigns have opened up capital markets for the EM quasi-government and non-government corporate sectors, resulting in a steady increase in both hard-currency (US dollar, euro and Japanese yen) and local-currency denominated issuance. This has enhanced the liquidity and depth of the asset class and allowed the creation of funds focused purely on EM investment-grade issues dedicated to EM corporate debt.

Strengths underlined by financial crisisInterestingly, the 2008–2009 global financial crisis did not lead to a major rerating or reappraisal of EM debt. If anything, the crisis reinforced investors’ existing favorable attitudes toward the asset class, and some investors even took the opportunity provided by market volatility to increase their allocations. This trend has parallels in the more recent volatility sparked by the Eurozone crisis, which generally has underlined the strong state of EM borrowers’ finances compared with some of the highly indebted developed countries, as well as emerging markets’ better growth dynamics. According to IMF forecasts, EM GDP growth will be 5.7% in 2012, far outweighing the 1.4% expansion anticipated in developed markets.

In our view, EM debt represents a potentially interesting segment of the market for investors seeking to increase diversification away from more established markets. While the legal framework has broadly improved as the asset class has expanded, managers operating in this area nevertheless need to undertake detailed credit analysis and due diligence, particularly when looking at the smaller markets. The opportunity set for EM debt is growing, and we believe that the outlook for returns from the asset class, when compared with yields from some of the largest developed sovereign and investment-grade bond markets, could remain attractive. William Ledward, Senior Vice President and Portfolio Manager, Franklin Templeton Fixed Income Group

Opinions expressed are the author’s at the publication date and do not constitute investment advice. This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an o�er for shares or an invitation to apply for shares of any Franklin Templeton Investment fund. Nothing in this document should be construed as investment advice. Data from third party sources may have been used in its preparation and Franklin Templeton has not independently verified, validated or audited such data. Franklin Templeton Investment shall not be liable to any user of this document or to any other person or entity for the inaccuracy of information or any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission. A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter can be found, on our website: www.franklintempletongem.com or can be obtained, free of charge, from the address below. Issued by the branch of Franklin Templeton Investment Management Limited in Dubai (“FTIML”), authorized and regulated in the UK by the Financial Services Authority and regulated in Dubai by the DFSA. This marketing material is directed at professional clients. Dubai o�ce: Franklin Templeton Investment Management Limited, Level 2, East Wing, The Gate, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E., Tel.: +9714-4284100 Fax:+9714-4284140

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The Standard Life group includes savings and investments businesses, which operate across its UK, Canadian and European markets; corporate pensions and benefits businesses in the UK and Canada; Standard Life Investments, a global investment manager, which manages assets of over £157.6bn globally; and its Chinese and Indian Joint Venture

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