Cover story: Investment is a level playing field, says Dubai’s AIX

It is now common knowledge that the Covid-19 pandemic has proven to be a test – of either survival or resilience – for most individuals and industries across the globe.

While the global health crisis did pose an existential question for many businesses worldwide, the investment landscape remained fairly upbeat, with the straining economic climate encouraging people to preserve and grow their wealth.

“The pandemic has led to an increase in risk appetite, because some people had to get out of their comfort zone and start looking at alternative ways to generate passive income. Some people lost their job, whereas some were on docked salaries. So, there was a serious concern of people starting to spend from their savings without any future returns. This [situation] has turned to our advantage,” says Fadi Dabbagh, board advisor at Dubai-based AIX Investment Group.

“We have especially noticed a very high increase in first-time investors – people that never invested before have actually started doing so now. This trend has expanded a lot since the onset of Covid.”

Numbers back the optimism: the UAE’s financial wealth grew by a compound annual growth rate of 3 per cent from 2015 to reach $600bn in 2020, 69 per cent of which was investable wealth, according to a Boston Consulting Group (BCG) report. The UAE, where 51 per cent of the country’s wealth is owned by people whose net worth is more than $5m, represented 26 per cent of the GCC’s financial wealth in 2020, which itself is projected to reach $2.7tn in 2025, up from $2.2tn in 2020.

Driven to diversify
While the pandemic did push people out of their comfort zones, it also encouraged investors to further diversify, a practice Dabbagh endorses. “What we usually recommend is diversifying the investment into different asset classes for the simple reason that it minimises risk and optimises revenue.”

According to an EY report, following a difficult year in 2020, clients narrowed their financial goals – they are increasingly focused on meeting their personal goals, diversifying their investments, protecting their wealth and maintaining financial security.

Meanwhile, diversification remains a key element of future wealth services, with investors expecting to make much greater use of alternative investments. One in three clients (32 per cent) invests in alternatives, but this is projected to reach 48 per cent by 2024, stated the report.

However, Dabbagh adds that the client’s requirements take precedence. “We cater to the requirements of the investor because while some are risk-averse, others wish to take calculated risks where the returns are higher. It’s all relative: high risk, high return. So, the portfolio depends on the profile of the client and what they are looking to achieve. But mainly, the majority of investors – both institutional and individual – are risk-averse.”

The EY report corroborated the broader sentiment, suggesting that as a group, wealth clients are risk averse, with just a third of clients preferring investments with high or very high levels of risk.

Engaging trends
While the Covid-19 pandemic has been a notable catalyst, other factors have also played a huge role in shaping the current investment landscape. One key element is purpose-led investments, with an increasing number of clients having sustainability goals.

Furthermore, the EY report revealed that climate change and carbon emissions are a concern for 42 per cent of clients globally, while specific to the Middle East region, that number scales up to 48.

“Impact investing – investments made to generate specific social or environmental impact alongside financial returns – is expected to grow an eye-catching 15 per cent by 2024, reaching an average adoption level of 35 per cent. Adoption rates among some groups will be even higher, exceeding 50 per cent among ultra-wealthy investors, millennials and Asia-Pacific clients,” the report added.

“The trend is more towards sustainability, which is a fact because everybody understands what’s going on,” explains Dabbagh. “Clients, however, still don’t realise the importance of it. So again, it is a part of the education process – offering a proper analysis of the pros and the cons [of investing sustainably] and sharing a better understanding of what sustainability means, at all levels.”

However, some conventional investment options continue to remain steady, having stood the test of time, real estate being one. In 2021, Dubai recorded the highest value of real estate sales transactions in 12 years, with Dhs151.07bn worth of properties sold last year, according to real estate company Property Finder.

“Real estate has and will always remain a long-term solid investment. We are witnessing recently that the market is gaining momentum again, with a noticeable price per square foot increase in most of the areas in Dubai. More so, there are always interesting offers in the market, and the advantage with AIX is that our financial advisors can guide you to make the right choice, be it investing in real estate or choosing a related investment product,” says Dabbagh.

Going digital
Another topic broadly deliberated is the use and longevity of digital assets – be it bitcoin, alternative coins or NFTs, among others. Bitcoin’s price increased 57.6 per cent in 2021, while Ethereum’s and Dogecoin’s prices hiked 404.21 per cent and 2,899.12 per cent respectively, according to BitPay, a crypto payments processor.

Dabbagh adds, “Digital is here to stay, and it has proven that throughout the pandemic period. Yes, it’s a volatile currency when it comes to trading, yet it is solid. Some of the biggest banks and exchanges have aligned with this fact and started adopting it.”

Digital adoption is not coming at an individual or organisational level alone but at a state level too. Central banks are also reviewing the issuance of digital forms of money, a seemingly organic step from the issuance of physical cash.

“Central banks have begun to engage in research on central bank digital currencies (CBDCs) and, in some instances, also their development. According to a survey from late 2020, 86 per cent of global central banks are conducting research on CBDCs, and as of July 2021, 56 central banks have publicly communicated their research or development efforts,” BIS’ (Bank for International Settlements) Working Papers No. 976 revealed.

Dabbagh stated: “If you review historically, initially it was all about trading, then cash currency was invented. So, the next step will be digitalisation – there will be a digital currency, and probably paper will vanish.

“Digital will be the new way of dealing with currencies in the future. A few central banks have either finalised or are at the stage of finalising the creation of their own digital currency. That said, it is not an easy task to do. However, eventually, all will follow suit within the next decade, or even earlier than that.”

Is it for everyone?
If financial stability carried gravitas prior to the pandemic, the health crisis has vaulted it as a top priority, with multitudes of people impacted from depressed bottom lines, job losses or salary cuts looking to generate additional income. More so, there has been an upward tick in the trend of not just preserving wealth, but growing it too.

“It is very simple; the wealthy are becoming wealthier simply because they are investing their money. However, one also needs to know how and where to invest. But yes, more and more people are realising its importance” Dabbagh says, adding that investors also have different priorities, as some are seeking retirement plans, while others are looking to generate passive income.

“What needs to be done is to choose the right [investment] product, and the right company, of course, to manage the funds. Which is why it is also very important to ascertain why one wants to invest. At AIX, we go through an entire process of trying to understand the objective of the investment, which reflects on our commitment to offer a right course of action. And that is essential,” he says.

Dabbagh adds: “Our philosophy is built on several components: data-driven analytics, proprietary algorithms and our experience in traversing difficult financial markets, which assist us in offering returns to our investors.”

AIX Investment Group, which was set up in Europe 14 years ago, has generated annual returns – depending on the product of choice and the risk appetite of the investor – averaging 29 per cent and can go considerably higher with a long term mindset investment.

But does the lack of financial knowledge impede the act of investing? Dabbagh feels that irrespective of the client’s underlying knowledge or experience, the investment landscape remains a level playing field for all. “There are different categories of investors – there are those who know what they’re doing. They’ve invested before and all they seek is the right product and the right company. Then there are those who have absolutely no idea, but are seeking passive income. But our approach remains the same, irrelevant of whether the client has the experience or not.”

He adds: “At AIX investment Group, we make sure that we offer a detailed explanation of all the right components and choose products that are best suited to the client’s requirements and objective at any given time. When it comes to investment, trust is the number one factor, the second being reward/return. And this is something we focus on a fair deal, ensuring that the client truly understands our background, history and operating model before we go into discussing investment opportunities. When clients feel comfortable and safe in the knowledge that the company knows what it is doing and with our proven track record, they proceed with the investment.”

“Sometimes, clients initiate with a smaller budget and when they see it working out for them, they bring in more money. Statistically, 68 per cent of our investors have made additional investments with us.”

With a workforce of over 60 employees and collaboration agreements with various organisations across the globe, AIX Investment Group has plans to expand further. “We are in the process of expanding our licencing portfolio and developing new products. New funds will also be created soon,” says Dabbagh.

What’s next?
From trading to digitalisation, the investment landscape has come a long way and continues to evolve at a considerable pace. But is there a perfect recipe for success? For AIX Investment Group, success is all about empowering investors to make the right call.

“Our job at AIX is educating the clients and giving them the right advice based on the current circumstances and their specific need at that point of time. And it is working. It’s a winning formula,” emphasises Dabbagh.