Advisers planning emerging markets allocation rise - 11th Nov 2011

A STRONG majority of Middle East-based investment advisers are planning to increase their clients’ allocations to emerging markets, according to a report by research agency Insight Discovery. However, the Middle East could miss out on the rise in allocations because of a perception that regulatory structures in the region are a challenge to doing business.
According to the report 70 percent of advisers will be raising their allocations to emerging markets in the next 12 months with infrastructure funds and commodities popular choices. Sentiment towards Shariah funds was also positive, although few of those surveyed said they would be backing this impetus with their clients’ funds. Hedge funds and private equity were the least popular.
There were several factors in the poor sentiment towards hedge funds, according to Nigel Sillitoe, CEO. The Madoff debacle has taken a toll as some of the most successful hedge fund of funds managers, in terms of raising capital pre the Madoff blow-up, had some exposure to his feeder funds. Also, the treasury departments of banks running proprietary capital “require more liquidity than ever, hence they often prefer investing in more liquid products,” he added.
While emerging markets are growing in popularity, 75 percent of those surveyed said regulatory structure was a key hurdle to business, ahead of political volatility.
“The main challenge is not the geo-political situation but the unclear and changing regulatory environment,” said Sillitoe. “However, there are several centres across the region that are, in effect, competing with each other for business thanks to the various governments desire to promote the development of financial services. This means that it is reasonable to expect that, in at least one of the countries across the region, and, possibly, all of them, a regulatory environment will appear within three years that is widely regarded as presenting a major opportunity.”
The report surveyed 225 senior executives, analysts and financial advisers from retail banks, private banks, independent firms, investment companies and family offices.

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