Filipinos send more cash home

Remittances of Filipinos working in the Middle East rose 6.6 per cent in the first quarter to US$719 million (Dh2.64 billion) as regional unrest and an improving economy prompted an increase in money flows.

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More money was sent home to the Philippines by workers in Bahrain, Yemen and Saudi Arabia in the first quarter of the year compared with the same period last year, data from the Philippine central bank showed.

But the amount of remitted funds from Egypt, Libya, Syria and Jordan decreased.

"In Bahrain, people have been remitting more than normal but the effect has been relatively short-term," said Jarmo Kotilaine, the chief economist of NCB Capital in Saudi Arabia. "Across the region where there's been less disruption, we would expect a continuity in remittances."

Concern about social and political unrest and associated worries about the financial systems of Bahrain, Egypt and elsewhere, prompted Filipinos and other expatriates to send money home, say economists.

Remittances from countries affected by the "Arab Spring" unrest rose 2.4 per cent to $425m in the first quarter of the year from the same period last year.

About 10 million Filipinos are estimated to work in more than 120 countries.

A significant proportion of those are based in the Middle East, where they are employed in many sectors including retail, hospitality and health care.

Demand for their services in the UAE and Saudi Arabia, the biggest Filipino employment markets regionally, has gradually risen as the economies have strengthened.

As many as 203,748 new job openings for Filipinos were seen from January to the end of last month, the central bank said.

A total of 30 per cent of the jobs were for positions in Saudi Arabia, the UAE, Qatar, Kuwait, Taiwan and Hong Kong. Remittances from the UAE rose by 12.4 per cent in the first quarter to $174.9m, and by a more modest 1.4 per cent from Saudi Arabia to $379.2m.

Globally, Filipino expatriates sent home $4.6bn in the first quarter, a 5.9 per cent rise from the same period last year.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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