More than 100 companies set up in the Dubai International Financial Centre (DIFC) last year - but filling a glut of new office space will be a crucial challenge for the centre.
A total of 113 companies registered in the financial free zone last year, attracted by a reduction in rents and changes in regulations among other things, an operational review released yesterday shows.
The amount of commercial space leased in the centre, meanwhile, grew by 19 per cent. There were 792 companies actively registered with the DIFC at the end of the year.
"With its continuous efforts to develop further its modern infrastructure, free-zone offering and self-governing laws and courts, DIFC has consolidated its position as the pre-eminent and favoured financial centre in the region," said Ahmed Humaid al Tayer, the governor of the DIFC.
The free zone attracted a range of businesses from the US, Europe, the Middle East and Asia last year. Several buildings under construction at the centre are expected to be completed in the next two years, adding about 186,000 square metres of leasable space at the centre to double the current space.
The current occupancy rate in the heart of the DIFC - a collection of buildings that are owned by the centre - is 95 per cent, but it is only 44 per cent in other areas in the zone owned by third parties.
"There is no doubt that the road ahead remains challenging," said Abdulla al Awar, the chief executive of the DIFC Authority, the body that manages the free zone.
"However, we believe that there are still many untapped opportunities that our new strategy will position us to take advantage of."
The DIFC last year signed up the consultancy McKinsey & Company to conduct a strategic review of its business. That review resulted in a new system of DIFC rents based on how long companies have been based there and how much space they are leasing.
It also coincided with reductions in rents and a new regime designed to attract fund managers to the centre. The DIFC also addressed its strategy for retailers, bringing in a new wave of outlets focused more on everyday needs than high-end trinkets.
With the review complete and the engagement with McKinsey at an end, the centre's leaders are now selling the DIFC as a well-regulated base for companies that want to do business in Africa.
They are also pitching it as a tax-free haven for European, US and Asian companies. The new entrants were split evenly, with 45 per cent from the Middle East and Asia and 52 per cent from North America and Europe. Officials recently went to the US to promote the DIFC, Mr al Awar said.
As it tries to attract newcomers, the DIFC is also offering reduced rents to encourage businesses already based there to expand their footprints. Several institutions, including the ratings agency Standard & Poor's, the accountancy Deloitte and the State Bank of India, enlarged their DIFC offices last year. About 28,000 sq metres of commercial space was added in the DIFC last year.
Majed Azzam, a property analyst at Al-Futtaim HC Securities in Dubai, said the oversupply was likely to depress the cost of DIFC properties further, a dynamic that would hurt developers but make it cheaper for international companies looking to set up there.
"We'll probably see them trending downward more as supply comes in," Mr Azzam said. "It's not positive for developers but it is positive overall for Dubai from a competitive point of view."
afitch@thenational.ae
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Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
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COMPANY PROFILE
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Second Test, Day 2:
South Africa 335 & 75/1 (22.0 ov)
England 205
South Africa lead by 205 runs with 9 wickets remaining
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Result
6.30pm: Al Maktoum Challenge Round-3 – Group 1 (PA) $65,000 (Dirt) 2,000m; Winner: Brraq, Ryan Curatolo (jockey), Jean-Claude Pecout (trainer)
7.05pm: Handicap (TB) $65,000 (Turf) 1,800m; Winner: Bright Melody, James Doyle, Charlie Appleby
7.40pm: Meydan Classic – Listed (TB) $88,000 (T) 1,600m; Winner: Naval Crown, Mickael Barzalona, Charlie Appleby
8.15pm: Nad Al Sheba Trophy – Group 3 (TB) $195,000 (T) 2,810m; Winner: Volcanic Sky, Frankie Dettori, Saeed bin Suroor
8.50pm: Dubai Millennium Stakes – Group 3 (TB) $130,000 (T) 2,000m; Winner: Star Safari, William Buick, Charlie Appleby
9.25pm: Meydan Challenge – Listed Handicap (TB) $88,000 (T) 1,400m; Winner: Zainhom, Dane O’Neill, Musabah Al Muhairi
Killing of Qassem Suleimani
How to get exposure to gold
Although you can buy gold easily on the Dubai markets, the problem with buying physical bars, coins or jewellery is that you then have storage, security and insurance issues.
A far easier option is to invest in a low-cost exchange traded fund (ETF) that invests in the precious metal instead, for example, ETFS Physical Gold (PHAU) and iShares Physical Gold (SGLN) both track physical gold. The VanEck Vectors Gold Miners ETF invests directly in mining companies.
Alternatively, BlackRock Gold & General seeks to achieve long-term capital growth primarily through an actively managed portfolio of gold mining, commodity and precious-metal related shares. Its largest portfolio holdings include gold miners Newcrest Mining, Barrick Gold Corp, Agnico Eagle Mines and the NewMont Goldcorp.
Brave investors could take on the added risk of buying individual gold mining stocks, many of which have performed wonderfully well lately.
London-listed Centamin is up more than 70 per cent in just three months, although in a sign of its volatility, it is down 5 per cent on two years ago. Trans-Siberian Gold, listed on London's alternative investment market (AIM) for small stocks, has seen its share price almost quadruple from 34p to 124p over the same period, but do not assume this kind of runaway growth can continue for long
However, buying individual equities like these is highly risky, as their share prices can crash just as quickly, which isn't what what you want from a supposedly safe haven.