Abdulmohsin AlOmran | A Deep-Dive Into Diversification, Retirement, and Asset Protection in Wealth Management

Oct 14 2021 | 7 min

During a webinar held on 6 October, The Family Office Founder and CEO Abdulmohsin Al Omran discussed with Mohammed Albaz, Bahrain Bureau Senior Reporter at Sky News Arabia, rising inflation after the Covid-19 pandemic, investment horizons in the region, asset allocation, etc.

Global Concern Over Rising Inflation

The US Federal Reserve focuses on two major goals: unemployment and inflation. The world economy had recently suffered a significant slowdown with the Covid-19 pandemic, but rebounded sharply after the successful vaccination, which led to shortages in many materials, used in modes of transportation and ships, etc. This affected oil prices especially, which became negative during the pandemic. All these factors together increased inflation. However, current inflation levels are transitory and may exceed the 2% targeted by the Federal Reserve.

Savers shouldn’t keep their money in current bank accounts, but invest it to protect it from inflation. 30 to 40 years ago, people would build their houses by buying some material and hiring some workers. This model no longer exists. People hire engineers who determine their needs and ensure the building is safe. The same goes for the investment model that changed in the last three years with the financial knowledge sought by the GCC generally and Saudi Arabia specifically with Vision 2030 to educate investors about saving and investing.

Investment and Asset Management in the GCC

When we established The Family Office in 2004, there was no licensing for wealth and asset management in the GCC. During the last 17 years, however, each country in the region established financial supervisory and legislative authorities for this industry, which led to substantial development. Undoubtedly, countries are keen to protect small investors as the minimum investment amount remains at SR1 million, but we expect different investment products in the coming period that would allow small investors to invest safely.

Every investor is different, depending on their risk appetite, available liquidity, and the time horizon they desire starting with three years. The shorter is the time horizon, the higher the risk, so we always advise investors to invest over the long term to preserve their wealth.

Investment is a culture. The more confident the investor is that investment companies are highly professional, the more they will invest. The pearl trade was the first in the GCC in the 1950s and 1940s. The pearl is not formed overnight. Like wealth, it requires a long time and needs a specific environment. Investors should treat wealth like pearl formation over the years, and avoid exposing it to storms and risks by being in a rush to create wealth.

Diversification to Protect Wealth from Investment Risks

Risk affects the performance of the investment portfolio. At The Family Office, we design an investment strategy for the client based on a questionnaire that determines risks, liquidity, and the desired time horizon by the investor. We then determine asset allocation and invest these assets in many countries, sectors, and companies. We form a diversified portfolio of strong companies that have cash flows, not unreal speculations with unreasonable valuations.

You cannot have a very high level of safety and very high returns. The ideal way is to make diversified investments that may have a high risk individually but can be decreased with diversification.

The Economic Situation in China

We have been reading from the beginning bad news about China, but the country’s economy keeps growing and is today the second largest economy in the world. China’s economy is also expected to surpass the US economy.

When a certain company or sector is affected for a specific period, this does not mean the end of the country’s economy. If we look at the sky and see a black cloud, would we say the sky is black? The news we hear about China is just this cloud, and China and the Asian markets are the promising markets. Even US portfolio managers allocate investments to these markets specifically. China has a very strong economy with a status in the world.

Investing Deposits

Safe is comfortable, but what is the result of comfort? When savers do not invest their deposits, the bank does. They only benefit if they are shareholders in the bank and will be harmed otherwise. Investment is not a choice. We advise you to start saving early and invest professionally with trusted, regulated investment companies, while avoiding adventure, speculation, and borrowing against your savings. Anyone following these principles will be safe.

Best Return Rates for Investors

We have been telling investors since the beginning and for 17 years that they must accept returns between 6% and 8% to preserve their wealth with minimum risk, and that an average of 7% means that their capital will double every 10 years. Some might borrow from banks and speculate to achieve returns between 14% and 20% per year. The question is, will speculation achieve the same 7% return over 20 years?

Investment Plan at The Family Office

We spared no effort from the beginning to find solutions for investors based on the information we acquire when we analyze the economies and markets of the world. We are committed to the duty entrusted to us and we shall persist in our policy. No client has ever invested with us for more than three years and lost even one riyal. This is a duty we shall continue to preserve.

The Family Office follows the same investment process for every investor regardless of their investment amount. We start with knowing clients and their needs through a questionnaire, then offer several proposals and move to implementation that is done in stages to protect the client’s wealth.

It is worth noting that The Family Office is licensed by the Capital Market Authority in Saudi Arabia, the Central Bank of Bahrain, the Securities and Futures Commission of Hong Kong, the Swiss Financial Market Supervisory Authority (FINMA), and the U.S. Securities and Exchange Commission (SEC). Our presence in these markets allows us to evaluate market performance and determine investment opportunities with the best strategic partners to create the right portfolios for investors. We aim to diversify client portfolios into different regions, industries, companies, and sectors worldwide.

Shariah-Compliant Investments at The Family Office

Shariah-compliant investment solutions differ from one company to the other. At The Family Office, 55% of our clients invest in deals that are approved by our Shariah panel.

Outlook for the GCC and the World Following Economic and Investment Transformations

The GCC region is doing well and is blessed with its oil wealth, financial wealth that was amassed over the years, and human assets with 70% of the young generation less than 30 years old. Anyone who visits the region is amazed by the progress year after year. There are challenges of course but the direction is right and the determination huge, and we will keep believing in our youth and investing in them. At The Family Office, we train 10 graduates every year, and will reach 20 trainees in the next period.

Internationally, you cannot predict but must be optimistic and have a written investment strategy that does not change based on moods. In the end, we urge you to partner with the best investment offices and you’ll be fine.

 

Disclaimer:

This presentation is provided to you by The Family Office Co. BSC(c) (“The Family Office”) for informational purposes only, and contains proprietary information that may not be reproduced, distributed to, or used by, any third parties without The Family Office’s prior written consent.

All information, figures, calculations, graphs and other numerical representations appearing in this presentation have not been audited and may be subject to change over time. Furthermore, certain valuations (including valuations of investments) appearing in this presentation are subject to change as they may be based on either estimates or historical figures that do not reflect the latest valuation. Although all information and opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to their accuracy or completeness. The information contained herein is not a substitute for a thorough due diligence investigation. Past performance is not indicative of and does not guarantee future performance. Exit timelines, prices and related projections are estimates only, and exits could happen sooner or later than expected, or at a higher or lower valuation than expected, and are conditional, among other things, on certain assumptions and future performance relating to the financial and operational health of each business and macroeconomic conditions.

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The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain C.R.No.53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

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