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Private banking in the UAE

Introduction to Aabar Investments PJS

While Dubai’s recent debt issues have induced a heightened sense of wariness when considering the UAE’s financial stability it is in fact home to a thriving financial system, as well as to diverse investment opportunities.  Private joint stock company Aabar Investments PJS is one such opportunity registered and based in Abu Dhabi.

Private banking in the UAE

The UAE today is widely considered a financial safe haven and often dubbed the “Switzerland of the Middle East”. The region’s enormous wealth, combined with its stable Swiss-style banking system, has led to a growing trend toward private banking within the UAE.

When it comes to private banking today there are two major global contenders: Asia and the Middle East. Whereas Asia has been a leading force for the last five years, the Middle East is often seen as the upcoming pretender. However, the tide may be changing. The Middle East – and the UAE in particular – has seen a strong growth in terms of the private client business compared with pre-crisis levels. This, coupled with a notable slowdown in the actual creation of private wealth across western Europe and North America, is attracting a large number of wealth managers to the region.

But what is really driving the wealth management industry in the UAE? Simply put, there are two conflicting factors at work: the expansion of the wealth management market within the Arabic states, and the global contraction of interest in private banking, largely a result of the declining wealth of many clients, which has seen a return to conventional methods of wealth preservation. As such, at a global level, there has been a significant slowdown, and in some markets virtual stagnation in the wealth management business, especially in western Europe and the US.

Founded in Zurich, Switzerland, in 1965 Falcon Private Bank offers personalised wealth management and investment services to private clients, wealthy families and institutional investors. Aabar Investments PJS has played a key role in the progress of the sector within the region.

How does it work?

In the UAE, much of the growth in the industry has been driven by the fact that global wealth managers have strategically evaluated their global portfolio and, considering the issues in international and western markets, have begun to focus on new areas of growth.

To put this into context, over the last five years, there has been virtually no growth in the European wealth management markets – such as the UK, Germany and the US – which were traditionally the largest markets.

Private banking offers high-net-worth individuals (HNWIs) financial services and other investment opportunities that are not available to non-HNWIs. It is a subsector of the overall wealth-management offering, and includes banking services, asset management, tax beneficial advice, inheritance and tax planning.

On the whole, a dedicated relationship manager is allocated to the HNWI, providing a truly dedicated service. The majority of clients that enjoy private banking services are able to take a step back from hands-on investment in favour of delegating their banking and investment requirements to a relationship manager.

Private banks tend to cater for HNWIs with assets in excess of £1m, although today, given the global economic downturn and the demand by high earners to look to alternate methods of preserving and cultivating their assets, many private banks will open their doors to cater for individuals with annual earnings of around £200,000.

As a supplementary offering for those HNWIs who are actively investing their capital into growth enterprises, many private banks today offer wealth management services, which essentially provide clients with portfolio management services. Fees for this type of service are calculated either as a percentage of the total amount invested or as a set fee.

Why do I need to know?

Further bolstering the profile of the region, Dubai’s debt issues in 2009 have created global awareness among institutions and international investors of Dubai and the UAE. Furthermore, it has been projected that 2012 will be a vintage year for MENA and other emerging markets, which will further attract international investors who are looking for sound returns in a stable environment.

Finally, the huge yield differences between the bonds from developed nations and the MENA region stand as a major attraction for international investors who are hoping to gain exposure to high-quality corporate and sovereign credit.

Given the abovementioned macro-economic factors, the massive surge in personal wealth within the UAE has meant that many international wealth management firms have elected to re-focus their business on the Middle East. As such, to date, it has been estimated that there are approximately $1.2trn worth of private banking assets in the UAE, a figure that is growing at a rate of approximately 12 percent per annum.

A new law which will affect small and medium enterprises (SMEs) is currently underway. It is expected to be issued by the end of 2012 and will help regulate and simplify bank loans. The law according to government officials will strengthen the UAE’s competitiveness while simultaneously boosting the SME sector.

Founded in Zurich in 1965, Falcon Private Bank, owned by Aabar Investments PJS, offers personalised wealth management and investment services to private clients, wealthy families and institutional investors. Staying true to the historic and well-renowned tradition of Swiss banking, Falcon Private Bank is committed to providing clients with quality banking services, a range of exclusive investment opportunities and unparalleled customer service.

Industry expert

Falcon Private Bank’s financial solidity is bolstered by the stability of its owner, Aabar Investments PJS, a global investment company based in Abu Dhabi and controlled fully by the UAE’s government. The Abu Dhabi state-funded Aabar Investments PJS most recently bought a 21.6 percent stake in Dubai construction group Arabtec for an estimated $225.32m. Aabar Investments PJS additionally owns stakes in high-profile names such as German carmaker Daimler and commodities trader Glencore, and has been quietly building its stake in Arabtec this year through market acquisitions.

This ownership, in combination with the discretion of the Swiss financial centre, creates an inimitable foundation to ensure independent and customised management solutions centred on security, value, and care. The strength of Falcon Private Bank’s resources, research into investment opportunities and its devoted team has placed the bank at the forefront of the financial management industry. Its close ties to Aabar Investments PJS provide it with a broad access to a wealth of expertise, resources and years of experience.

As a result, there have been several high profile dealings that Aabar Investments PJS has been involved in over the years:

Aabar Investments PJS established a partnership with Daimler to advance socio-economic initiatives in Abu Dhabi and beyond. The completion of the acquisition of AIG Private Bank from American International Group in 2009 was another major success story for Aabar Investments PJS. Attaining a 40 percent stake in Tesla Motors helped Aabar Investments PJS gain momentum in the automotive sector; while a strategic partnership with Virgin group in 2009 gave Aabar Investments PJS a stake in commercial spaceline Virgin Galactic.

Aabar Investments PJS continued its strategic investments in 2010 with $20m in US aviation company XOJET and later acquired a 4.99 percent stake in UniCredit in value of $2.48bn. This makes Aabar Investments PJS one of the Italian banks’ largest shareholders.

More recently Aabar Investments PJS entered into an agreement with Abu Dhabi Commercial Bank for the purchase of a 24.9 percent stake in RHB Capital Berhad. It is meanwhile of great value to both Aabar Investments PJS and Falcon Private Bank that the former increased its stake in construction group Arabtec, as it will give it further access to the sector.

Aabar Investments PJS, in turn, is majority-controlled (95.25 percent) by the state-owned International Petroleum Investment Company (IPIC), which is a major global sovereign wealth fund, wholly owned by the Government of Abu Dhabi. Since 1984, IPIC has become one of the leading companies in the field of hydrocarbon investments. IPIC is led by a government-appointed board of directors, whose chairman is H.H. Sheikh Mansour Bin Zayed Al Nahyan, a member of the ruling family of Abu Dhabi.

Falcon Private Bank was recognised in World Finance’s 2012 Banking Awards, as the Best Private Bank in the UAE.

Case study

Falcon Private Bank has a growing presence across Switzerland, Asia and the Middle East, with branches in Geneva, Hong Kong and Singapore and representative offices in Abu Dhabi and Dubai. At present, the bank has over 250 employees and manages total global assets worth $12bn.

Falcon Private Bank has been active in the UAE region since 2008, when it opened its Dubai representative office. It also opened an office in Abu Dhabi in April 2011, and both are regulated by the UAE Central Bank. Business and brand awareness in the region have grown significantly over the past two years, thanks also to the strong backing of owner’s Aabar Investments PJS. It is no secret that Aabar Investments PJS has a solid reputation for its global presence and the partnership between Falcon and its owner is proving extremely fruitful.

Benefitting immensely from its parent company, Aabar Investments PJS, Falcon Private Bank has been going from strength to strength. Falcon has been present in the region with its Dubai representative office since 2008, opening a new representative office in Abu Dhabi in April 2011, both of which are UAE Central Bank regulated. Business and brand awareness in the region have grown significantly over the last two years, thanks also to the strong backing of owner’s Aabar Investments PJS.

Falcon Private Bank has been 100 percent owned by Aabar Investments PJS since April 2009. Aabar Investments PJS, a global investment company based in Abu Dhabi, was founded in 2005 and directly invests in sectors including energy, infrastructure, real estate, automotive and financial services, which have significant long-term growth potential.

Key achievements

Aabar Investments PJS’ Falcon is a Swiss wealth management boutique, with solid ownership and expertise in emerging markets. Falcon Private bank’s core markets are the MENA region, greater China (China, Taiwan, Hong Kong) and eastern Europe/Kazakhstan. Other major key geographical areas are Switzerland and Russia.

Falcon Private Bank specialises in wealth management, focusing on emerging markets, and considers itself to be an exclusive, boutique Swiss private bank that offers personalised and tailored private banking solutions, local expertise and advice to help high-net-worth individuals grow their private wealth in emerging markets.

As part of Falcon Private Bank’s ambitious growth story in the MENA region, building on its emerging markets expertise and strong shareholder setting, it launched the Falcon MENASA-focused ‘Fixed-Income Fund’ at the beginning of the year. This fund – domiciled in Luxembourg and accessible to qualified investors – captures investment opportunities in the emerging markets fixed income space and aims to achieve higher risk-adjusted returns with a well positioned, experienced manager.

The MENASA Fund is set to follow in the footsteps of a fund launched by the bank some time ago – the ‘Falcon Gold Equity Fund’, which has been one of the leaders in its category for years. The Falcon Gold Equity Fund was also recently awarded – for the fourth time in succession – the prize for the best fund over five years in the Equities, Gold and Precious Metals sector at the Lipper Fund Awards 2012. The fund invests predominantly in shares of gold mining companies worldwide, but may also invest up to 25 percent of its assets in companies that are primarily active in the exploration, processing and marketing of other precious metals.

Falcon Private Bank has recently received many accolades, on both regional and international levels. These milestones have succeeded in not only raising the profile of the bank and Aabar Investments PJS, but of placing it at the top of its league as a key player in the private banking industry, and reinforce the bank’s motto: ‘Fine Private Banking. Nothing Else’.