Wealthy investors bet on Dubai, Abu Dhabi despite regional risks

Business Standard

3 days ago

At the Dubai offices of Abbey Road Investment Group, the phone calls and emails keep landing from around the world.
The inquiries are from potential clients from India and the UK, the US and Africa — even as far afield as Brazil. They're all looking to set up family offices in Dubai and Abu Dhabi, the twin emirates that offer to safeguard the fortunes of the world's wealthy without income or inheritance taxes.
The cities, both part of the United Arab Emirates, have become irresistible for the world's richest people. Europeans have turned to the Gulf country to seek respite from economic uncertainties, while some wealthy Chinese have begun looking beyond long-favored hubs like Singapore. The UAE has also become a top pick for many of those relocating from the UK, where the government abolished a tax break for non-domiciled residents.
They are all willing to look past the geopolitical risks swirling in the Middle East, which have been on sharp display in recent weeks as Israel and Iran launched missiles at each other. While the UAE wasn't directly affected, it stands just across the Persian Gulf from Iran. Yet the world's wealthy keep betting on the Gulf country.
Abbey Road's founder Arjun Mittal says his clients like the UAE's central geographical location between east and west, tax benefits and fast developing financial system.
'We've seen no slowdown at all because of regional conflict,' said Mittal, who is the chief investment officer of Abbey Road, which acts as a multi-family office offering investment advice to wealthy clients. 'If anything, it reinforces the UAE's position as a neutral, strategic hub.'
Dubai's international financial center estimates that it's home to family-related entities that control over $1.2 trillion, with the total number rising 33per cent to 800 last year.
The wealth influx is driving yet another year of gains in Dubai's luxury property prices, while providing new money for its burgeoning hedge-fund industry. The emirate's financial hub has more than 70 hedge funds, while neighboring Abu Dhabi houses giants like Brevan Howard Asset Management and Marshall Wace.
Bridgewater Associates founder Ray Dalio, who has been coming to the UAE for about 30 years and set up his family office in Abu Dhabi in 2023, points to the country's multinational lifestyle and its expansion into finance and AI.
'It is getting a lot more traction because as other places are deteriorating it's improving quickly so the contrasts are becoming more obvious,' Dalio said.
This year, the Middle Eastern country is poised to attract about 9,800 new millionaires, more than any other nation, Henley & Partners estimates.
Early data suggest the rich haven't been deterred by the tensions in the broader region. Luxury property prices in Dubai — an investment favored by foreign families — hit new records in the second quarter. Sales of homes priced above $10 million surged to $2.6 billion between April and June, according to researcher Knight Frank. The figure marked a 37per cent increase from the first quarter.
Last month, Abu Dhabi's international financial center welcomed 267 new entities — including different types of companies and family offices. The hub has a strong pipeline for the rest of the year, a spokesperson said in a statement.
Regional risks are still lurking in the background. The UAE is an American ally that's home to thousands of US military personnel. After the US hit Iran's nuclear sites last month, the Islamic Republic threatened to attack American assets and launched missiles on a US base in neighboring Qatar. There were no casualties.
US President Donald Trump went on to announce a ceasefire between Israel and Iran. Yet, there are lingering uncertainties about the status of Iran's nuclear program.
'Drones and missiles in the region have not been targeting individuals' safe deposit boxes. Yet surely a major, successful attack on desalination facilities or an airport keeps government officials up at night,' said Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington. 'I'd say such threats fall into a low likelihood-high impact category.'
To hedge against risks, the rich from overseas tend to put only some assets in the UAE and diversify well beyond, he said. 'The UAE is usually just one part of global optionality constructed by family offices.'
The new money flowing in, coupled with the billions already held by local families, has already been fueling a more sophisticated private banking industry for the UAE as banks from Barclays Plc to Deutsche Bank AG and even Bank of Singapore expand.
Barclays has seen double-digit growth in the total number of family offices it serves in the UAE and has relocated staff from overseas. 'The UAE is a key strategic market for us, not only because of the wealth creation from local Emiratis, but also because of the massive migration that has come into the country which has been extremely successful,' Mathias Gonzalez, Barclays private bank's new head of investments in Switzerland and Dubai said in an interview.
At Dubai-based wealth advisory firm M/HQ, managing partner Yann Mrazek says one in five family offices they have been setting up are either Chinese or have some China connection.
Elsewhere, one Chinese family office for several billionaires recently sold off most of their financial holdings in the US amid concerns about a recession there and is allocating a large chunk of the proceeds to Dubai this year while also weighing options in Asia, a person with knowledge of the matter said, asking not to be named discussing private information.
While they might have considered Singapore in the past, they were reluctant to use it this time because the country has introduced more regulatory reporting requirements in recent years, the person said. The Iran-Israel conflict didn't dent the family's view on the UAE because they see geopolitical risks in other parts of the world as well, the person added.
Still, despite the UAE's gains, Singapore remains a primary hub for Chinese money and wealth from other countries.
The city-state 'continues to receive strong interest' from family offices who are keen to access investments opportunities, said a spokesperson for the Singapore Economic Development Board.
Many rich families are willing to look past the geopolitical risks of the Middle East because of difficulties in their own countries, said Mogielnicki, the political economist.
'Plenty of the individuals behind the influx of global wealth into the UAE are coming from places with substantial risk, be it conflict-related or otherwise,' he said. 'Risk tolerance is a relative measure.'
--With assistance from Alex Dooler, Hema Parmar, Gabrielle Ng, Ben Bartenstein and Nicolas Parasie.