As 2017 comes to a close, the GCC’s stable investment outlook remains exposed to a variety of risks. Volatile oil prices, government spending reductions, and subsidy cuts have created uncertain near term projections, which are set to impact the ability of the region’s institutional investors to capture alpha generation.
Globally, traditional investments – equities and bonds – are unlikely to sustain returns generated in the bull market years following the global financial crisis. At the end of the eighth bull market year for equities, many are considering whether we’ve reached the top of the market, and are preparing for a correction – or worse – in the near future.
GCC institutional investors must find new ways to remain ahead of the curve with new asset classes and industries with high growth potentials. One such area is, without a doubt, the technology and innovation sector. It not only offers significant investment potential but is integral to the region’s future.
All the region’s governments are placing technology, innovation and knowledge economies at the centre of their respective future visions, and organisations in the Middle East and Africa are projected to spend $7bn on IoT by the end of the year. In Dubai alone, the government’s ambitious roadmap to become a smart city by 2021 saw the launch of 545 smart initiatives and services around connectivity and technological infrastructure, at an estimated $8bn price tag.
These industries represent high-growth sectors that remain predominantly private. They also represent strong investments for institutional players who can provide smaller companies with liquidity, insight and network to support growth.
These are still early days in the UAE. But major global brands such as Amazon and Alibaba have made technology investments in excess of $1bn in the UAE. Additionally, regional technology startups such as Careem and logistics provider Fetchr have generated international headlines through successful fundraising. This points to the emergence of a more mature ecosystem for technology startups to scale up and increased value at exit.
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