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ISSUE FORTY FOUR - DECEMBER - JANUARY 2018

The blockchain technology revolution

PHILIPPE GHANEM, CEO AND VICE CHAIRMAN OF ADS SECURITIES INVESTMENT THE ASSET CLASS OF THE YEAR 36

40

HNWI CHAT HEND SABRY

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CONTENTS

ISSUE FORTY FOUR - DECEMBER - JANUARY 2018

OPINION

06

A sincere thank you

NEWS & ANALYSIS

Editor's

LETTER

Greetings all, Welcome to the 44th issue of WEALTH Arabia. We hope you enjoy this look back at the WEALTH Arabia Summit 2017. The excellent content that the event provided is the perfect way to reflect on the year, as well as to look ahead to the next. These are challenging times for investors, and we are certain to have a full slate of insightful analysis in the coming year to match. The back half of our magazine has a lot for you to enjoy on your holiday break. I was able to sit down with Hend Sabry, one of the region’s elite actors and philanthropists, at this year’s Dubai International Film Festival, who provided insight into her current focus, as well as the highest points in her life. If you’re planning ahead to your summer holidays already, and are looking to make a stop in Barcelona, don’t think—book the Mandarin Oriental Barcelona now. Read more on page 46. Beyond that, there’s still much to explore. I hope you enjoy it. Till next time,

William Mullally 4

08

The latest analysis from the investment world

COVER STORY

10

ADS Securities: The blockchain technology revolution

10 16

WEALTH ARABIA SUMMIT 2017

16 18 22 26 30 34

China’s rising importance Increasing ROI in uncertain times Is alternative investment still alternative? Investing with impact

30

Where to invest in blockchain Don’t wait until it’s too late

INVESTMENT

36

FXTM

HWNI INTERVIEW

40

Hend Sabry

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42 Chairman SALEH F. AL AKRABI Chief Executive Officer TONY LONG Sales Director OMER HUSSAIN

Editor, WEALTH Arabia WILLIAM MULLALLY William@cpifinancial.net Tel: +971 4 391 3718

AVIATION

42

Private but budget conscious

46

LUXURY TRAVEL

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EDITORS MATT AMLÔT matt@cpifinancial.net Tel: +971 4 391 3716 JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024 NABILAH ANNUAR nabilah.annuar@ cpifinancial.net +971 4 391 3718 Contributors Hussein Sayed ADS Securities

Mandarin Oriental Barcelona

GOOD TALK

Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net

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Patrick Stewart

Senior Designer FLORANTE MAGSAKAY florante@cpifinancial.net

Online Content Manager SIYA PAINAYIL siya@cpifinancial.net Tel: +971 4 391 3722

Business Development Manager WEALTH Arabia DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 3752526 Business Development Managers NIKHIL MATHUR nikhil@cpifinancial.net Tel: +971 4 391 3717 MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 391 5320 SIMON MOTWALI simon.motwali@ cpifinancial.net +971 4 4335321 London Bureau ISLA MACFARLANE isla@cpifinancial.net Tel: +44 7857 429476 Consultant ROBIN AMLÔT robin@cpifinancial.net Finance Manager SHAIS MEMON, ACCA, CMA Shais.memon@ cpifinancial.net Tel: +971 4 391 3727 Administration & Subscriptions enquiries@cpifinancial.net Tel: +971 4 391 4682 Tel: +971 4 391 3709

46 Head Office P.O. Box 502491, Dubai Media City Dubai, UAE Fax: +971 4 390 9756

ISSUE FORTY FOUR - DECEMBER - JANUARY 2018

ISSUE FORTY FOUR - DECEMBER - JANUARY 2018 The blockchain technology revolution

www.cpifinancial.net WEALTH WARNING! Remember, if you wish to act on any of the information you read in WEALTH Arabia, consider taking independent advice first. WEALTH Arabia is written for a general audience and the information contained herein may not be appropriate for your personal circumstances.

The blockchain technology revolution

PHILIPPE GHANEM, CEO AND VICE CHAIRMAN OF ADS SECURITIES 36

INVESTMENT THE ASSET CLASS OF THE YEAR

40

HNWI CHAT HEND SABRY

46

AVIATION GI AVIATION

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Registered at the Dubai Media City Printed by United Printing & Publishing – Abu Dhabi, UAE © 2017 CPI Financial FZ LLC All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the Managing Editor.

24/12/2017 14:22

Don’t miss your copy of WEALTH Arabia. Subscribe now, full details at: www.wealtharabia.net and on Twitter @wealtharabia. ISSUE FORTY THREE - DECEMBER - JANUARY 2018

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OPINION

A sincere thank you…

W

ith so many stories developing into 2018, I wanted to take this time at the end of 2017 as I write this to everyone who attended and supported the second annual WEALTH Arabia Summit. When we came up with the concept two years ago, I wanted it to be a place where individual investors could get actionable investment advice with substance that they could take into consideration as they approach their portfolio in the coming year. In its second edition, we had much of that. We heard from blockchain experts about where they are putting their own money in cryptocurrency and blockchain for the coming year. Impact investment professionals pointed out specific companies that are in need of investment, and providing big returns. Our alternative investment panel discussed how investment is changing across the globe. Beyond this, there was so much more. In this issue we have a write up on each panel, but there is so much we are not able to include. If you miss this Summit, you truly miss a lot. There is no rest for the wicked—we have already begun planning our third Summit. Next year, we look to expand it to something bigger. More panels, a larger audience, and a wider scope. We want to allow you to choose your track for the day, and pick what interests you most.

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We also want you more involved. Please reach out to me at William@CPIFinancial. net, so we can discuss this further. There is so much left to discuss. I can’t wait to see you all again next year.

William Mullally

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25/12/2017 11:09


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NEWS & ANALYSIS David Kohl, Chief Currency Strategist, Julius Baer

T

he gradual decline in sovereign creditworthiness over the past 10 years appears to have come to a halt, according to S&P

For a decade, sovereign rating downgrades have outnumbered upgrades. The average rating of the currently 131 rated sovereigns has dropped by one notch over the past 10 years. However, 2018 looks more promising. Our outlooks on long-term ratings are a useful pointer of the likely direction sovereign ratings will take in the coming year or two. Through 2017, the balance of positive and negative outlooks has improved dramatically. For the first time since March 2008, the balance of outlooks is positive, even if only minimally so. This suggests that the slow but inexorable slide in sovereign ratings over the past decade may come to a halt in 2018. Potentially, we may even see a very mild recovery of the average rating. In this sense, 2018 could be a watershed year. WE MAY HAVE REACHED THE BOTTOM: NET OUTLOOK BALANCE GLOBAL SOVEREIGNS (No of sovereigns)* 20 10 0 (10) (20) (30)

Jan Ju 04 l-0 Jan 4 Ju 05 l-0 Jan 5 Ju 06 l-0 Jan 6 Ju 07 l-0 Jan 7 Ju 08 l-0 Jan 8 Ju 09 l-0 Jan 9 Ju 10 l-1 Jan 0 Ju 11 l-1 Jan 1 Ju 12 l-1 Jan 2 Ju 13 l-1 Jan 3 Ju 14 l-1 Jan 4 Ju 15 l-1 Jan 5 Ju 16 l-1 Jan 6 Ju 17 l-1 7

(40)

* (Month-end observations. Last obs=Nov 2017) Copyright © 2017 by Standard & Poor’s Financial Services LLC. All rights reserved.

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eadings of leading indicators signal further growth acceleration despite already elevated levels, according to Julius Baer.

The most recent business climate reading has once again been remarkably strong despite already elevated levels. At this level, vertigo seems to be a natural reflex and we ask if it can get any better from here. Yes, it can, but the most likely direction is an extended peak in the global growth dynamics. The regional broadening of economic growth is a particularly supportive factor which is self-enforcing and reduces the risk of an imminent deceleration of the current growth trend. Monetary conditions remain supportive as well arguing also against weaker growth dynamics in the months to come. Nevertheless, climbing to 60, the purchasing managers’ index (PMI) in the Euro zone has reached one of its highest levels in its entire history. Suffering from vertigo at such levels seems to be normal. Beside fear, there are also fundamental drivers which justify a rolling-over of Euro zone growth dynamics in the coming months. This year’s appreciation of the euro has tightened monetary conditions, which is a headwind for growth in 2018. In addition, China’s focus on structural reforms instead of reckless growth stimulus limits the eurozone growth in 2018. The US PMI reading disappointed slightly but continues to signal a solid economic expansion. The fundamental outlook for next year is actually better in the US than the Euro zone. Financial and monetary conditions remain very easy despite the interest-rate hikes. The softer US dollar and pleasant financial market performance help. China and global growth swings have less of an impact on the US economy. As a result we expect US leading indicators to re-accelerate from the current levels.

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COVER STORY

The blockchain technology revolution

PHOTO CREDIT: DENCG/SHUTTERSTOCK.COM

PHILIPPE GHANEM, CEO AND VICE CHAIRMAN OF ADS SECURITIES, BELIEVES THAT INVESTORS NEED TO LOOK PAST BITCOIN TO THE UNDERLYING BLOCKCHAIN TECHNOLOGY

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T

echnology in trading is always changing. New systems are introduced, legacy platforms become obsolete and the industry moves on but for many years the structure of the industry has been set. The systems and interactions from trading to clearing and settlement have followed a defined path, however this could all change as the financial services industry is on the cusp of potentially one of the greatest upheavals in its history—blockchain. This will not happen overnight, but there will be gradual implementation of systems which allow the decentralisation of trading. cont. overleaf

PHILIPPE GHANEM

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COVER STORY

The market has been slow to adopt blockchain, and at the moment the use of the technology is mostly based around cryptocurrencies, but if you follow developments you will have seen that the Australian Securities Exchange (ASX) recently announced that it will be introducing distributed ledger (DL) technology for clearing and settlement. This was a very important piece of news. ASX would be the first significant exchange to introduce DL or what most people would refer to a blockchain. ASX in their announcement were careful not to use the term ‘blockchain’ as this is always associated with cryptocurrencies, but this is the technology they will be using. ASX is a relatively new exchange so why after 30 years of trading has it decided to change is to a new trading model? A blockchain is essentially an ‘appended only’ database, where no inputs are deleted, and new records can be continuously added. Each new record, for example a financial transaction, includes a unique ID code (hash) that is mathematically generated as a function of the collective information incorporated in all previous transactions and this is stored in the database. As a result, if you know the hash of any transaction in the database, you can verify that all previous transactions have happened. You have complete transparency of all the actions that led to the completion of the transaction. So, why is this approach able to change the way that financial services operate? The answer is straight forward. Blockchain financial services platforms make it possible for multiple parties to work with identical copies of a single database. By matching an identical hash you know that you are both looking at, and accessing, the same date. It is secure, and the data in that chain cannot be altered. Additionally, blockchains have the ability to link trillions of pieces of data there is no limit on their scalability. So the move by ASX is very smart as DL and blockchain will have a very important role in the future of financial services. For example, in recent years’ regulators have made it clear that they want FX trading to be exchange based, mostly for

A blockchain is essentially an ‘appended only’ database, where no inputs are deleted, and new records can be continuously added. Each new record, for example a financial transaction, includes a unique ID code (hash) that is mathematically generated as a function of the collective information incorporated in all previous transactions and this is stored in the database. – Philippe Ghanem, CEO and Vice Chairman of ADS Securities

cont. on page 14

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PHOTO CREDIT: DENCG/SHUTTERSTOCK.COM

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COVER STORY cont. from page 12

and framework that at the moment central banks, on behalf of governments, provide. As soon as the industry moves to this new model there would be significant additional benefits, such as the use of smart contracts, which can remove the need for a number of ‘middlemen’ further reducing costs and in many areas additional complications. Smart contracts are based on the same DL technology with all parts of any interaction being recorded providing the shared transparency forms are looking for. This would allow trading solutions to be moved from a centralised to a decentralised model, significantly lowering the price per trade. An immediate benefit of this would be the democratisation of market participation which would help increase liquidity. At ADS Securities, we are currently building our third generation trading platform, and after reading the comments above, I am sure it will come as no surprise that we are using blockchain technology for the back-end systems. Settlement, clearing

and reconciliation systems will all be based on a cryptographic ledger system, however the front end of the platform will be a development of the type of GUI which is already being used. It will provide investors with the interactivity and trading tools that they are used to when trading using the ADS Securities OREX platforms, but they will have the benefit of all trades being logged through a secure cryptographic ledger system. The financial services industry has always been very quick to adopt change, especially where it provides value and opportunity. Almost all references to blockchain are linked to cryptocurrencies, and we were the first investment firm in the GCC to offer these on our trading platform, but for me bitcoin or ethereum are important but it will be the underlying technology which we should be focusing on. So, as the conversation across the world’s financial markets turns to the increased trading of cryptocurrencies, my advice would be to steer clear of the current volatility they offer, and invest in the blockchain systems that make the trading of the coins possible.

PHOTO CREDIT: WIT OLSZEWSKI/SHUTTERSTOCK.COM

transparency purposes. For a number of reasons, and using the current technology, this would be very difficult to achieve. But, blockchain immediately answers many of the problems. A secured cryptographic ledger system would transform the way the FX market operates. Clearing transactions through blockchain would make transactions faster, decrease risk and reduce the cost of post-trade confirmation. The blockchain would also allow trading solutions to be moved from a centralised to a decentralised model, significantly lowering the price per trade. An immediate benefit of this would be the democratisation of market participation which would help increase liquidity. Although DL or blockchain can be based on a decentralised model there will always be a need to regulate the industry. At ADS Securities we have always been an advocate of strong, but fair, regulation, as this provides a level playing field for all market entrants. Our view would be that if it is a model that can be made to work banks, and or financial institutions, could have a capital role as custodians and arbitrators, helping to apply the necessary regulation

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WEALTH ARABIA SUMMIT 2017

China’s rising importance GARY DUGAN, CIO OF GARY DUGAN & ASSOCIATES KICKED OFF THE SUMMIT WITH A ROUSING KEYNOTE ON THE FADING US INFLUENCE, CHINA’S RISE, AND HOW IT WILL AFFECT INVESTMENT WORLDWIDE

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he WEALTH Arabia Summit 2017 proved once again to be an essential forum for HNWIs and their representatives to discuss the latest investment trends and prospects with some of the top minds in the industry. Robin Amlôt, Consultant and former CEO, CPI Financial kicked off the proceedings.

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“Why are we here today? We live in uncertain times. 22,000 investors across the world find that people are investing in markets over saving in the bank, investing in property and luxuries and paying off debt. But at the same time, people have unrealistically high investment return expectations, suggesting there is an

investment knowledge gap. Investors expect to make a 10.2 per cent returns rate, when the MSCI returns only 7.2 per cent,” said Amlôt. “Stock markets are at record high. Valuations of share are at the upper end of historic ranges. In bonds, there have been some unusual sales. There was a 100-year bond with a coupon rate of just 2.1 per cent in Austria. That’s perhaps a better risk than the there 100-year bonds issued by Mexico, who at least manages their own currency.” In its inaugural edition in 2016, Mark Mobius, Executive Chairman, Franklin Templeton Emerging Markets Group enlightened the audience with a keynote discussion on his decades of experience. In its second edition, Gary Dugan, Chief Investment Officer of Gary Dugan & Associates, a leading global and regional voice who was until mid-2017 the CIO for Emirates NBD, began the day with an enlightening keynote presentation on the future of China’s influence on the global investment landscape. “Why is it that geopolitics that is the most important thing that people

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GARY DUGAN, CIO OF GARY DUGAN & ASSOCIATES

look at their investments in terms of things that they fear? What is the global dimension of all the challenges that we’re seeing? I’m thinking about the Bali volcano at the moment, which is a movement of tectonic plates, because in politics, we have some massive moves of tectonic plates. Whereas the US has been dominant, Russia and China are pushing their way into the global economy like never before.” “When I was working at Barclays, someone spoke about how China is going to become a dominant force. At the time, no one believed me, but I believed it because I had been there and seen it,” said Dugan. However, all eyes are not just on China these days. The US, while potentially going through a period of transition, still has the world’s attention. “The first question we’ve got to ask ourselves, and the dominant force of change at the moment, is what is happening in the US. I don’t just mean in terms of its current policies, but it is really a country in decline in terms of the scale of its impact on the world. It’s still big, yes, but even the cover of Time

magazine saw that the US was not as dominant as it was in the past as there are other bullies on the street at the moment. China is trying to create its own influence on foreign policy.” Even the dollar may lose importance, softening the United States’ influence, said Dugan. “As we know, net/net the US is an importer of capital, not an exporter, not to say they don’t spend around the world in terms of investment. Cryptocurrencies is a challenge for the dollar, for certain. The dollar is very unlikely to carry on forever. If we don’t have to take the dollars, we don’t have to take the US politics. We don’t have to worry so much about whatever Donald Trump may say in terms of the global economy.” While many are still split on who has more influence, the US or China, the mere fact that we are asking the question says it all, according to Dugan. “Many say that there has been a massive shift in the global economy, but not everyone agrees. Many countries think that US is the major superpower, but other countries, most notably in Europe, believe that China is the dominant superpower. Go back ten or even five years, I don’t think that would have been the perception at the time. China is so much more important. Many countries are thinking, who do we align with? Who do we trade with? Who do we get closer to? If you look across the world, many countries are asking, do we really need to side with the US? And if we do open up to China, on what basis should we do so, and what would be fair?” It is China’s trade activity that is most illuminating, says Dugan. “China is already a very dominant trade partner. Much of Europe is still dominated by trade with the United States, but for the rest of the world, China is already dominating discussions of trade. 124 countries have China as their largest trade partner, with 54 for the US.Across the world, China has prioritised the maintain of its trade routes. Sometimes there is pushback, but if you see the scale of China’s involvement of the global economy, it’s very large.”

While business may be booming, the world has yet to see China flex its political muscle. “We have the trade, but we don’t have the politics. China is still being quite slow in the way that it evolves its political views. But it is causing trouble worldwide. It’s not easy for Donald Trump to say that he doesn’t care, and the US will do it the US way. Why? Because of China’s dominance of global trade. I’m not sure Apple would be happy if they couldn’t import what it needs, for example. It’s somewhere between 20 to 80 per cent of world exports that come from China. You can’t just turn this country off any longer. China is such a significant force in terms of every day product, that you can’t just ignore China.” The US may speed things up by reneging on trade agreements, said Dugan. “The other important policy is the ripping up of NAFTA, which is one trillion dollars of trade. If you break that all down, many are looking at Mexico. The deal with Canada is set in stone, so it’s really just a way of beating up on Mexico. Many experts have said that it is disastrous to end NAFTA.” Investors should keep their eye on several key potential moves. “The one thing that is most worrying in terms of near term issues is the last one—invoking section 232. Trump is now going to talk about the ‘basis of national security’. Just a few weeks ago, the US Congress invoked this section and stopped the import of aluminum from China.” But, living in Trumps world, there are already signs that his words cannot be relied upon, and that his participation is not needed for countries to find success. “If you look at trade policy, there is a lot of fear that things could be dampened down. Even in the case of Mexico, people are starting to realize that there is a lot of bark, but the bite may not come until later, so they can work their way through. The US withdrew from the Trans Pacific Partnership, the other 20 countries have continued. Trade growth has been key to the global economy, so there is still some advantage to take from that. Even with Trump, global trade grew in 2017.”

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WEALTH ARABIA SUMMIT 2017

Increasing ROI in uncertain times AN ALL-STAR PANEL OF INVESTMENT PROFESSIONALS GATHERED TO DISCUSS ASSESSING RISK FOR 2018 AT THE WEALTH ARABIA SUMMIT 2017

GARY DUGAN, CHIEF INVESTMENT OFFICER, GARY DUGAN & ASSOCIATES; TAIMUR KHAN, SENIOR ANALYST, KNIGHT FRANK; SHERIF WAHBA, MANAGING DIRECTOR, GOLDMAN SACHS; GIAMBATTISTA ATZENI, SENIOR WEALTH DIRECTOR, BANK OF NEW YORK MELLON, ANTHONY TAYLOR, FUND MANAGER, EMIRATES NBD REIT AND DIEGO WUERGLER, HEAD INVESTMENT SOLUTION & ADVISORY MIDDLE EAST, JULIUS BAER WERE JOINED ON STAGE BY MODERATOR ROBIN AMLÔT, CONSULTANT, CPI FINANCIAL.

A

n old myth has it that there is a curse that goes, ‘may you live in interesting times’. There are few times in history to which that saying applies to better than 2017. For investors, gone are the days of bonds being all an investor needs. In today’s investment climate, HNWIs have

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to be more savvy than ever before in order to meet the return on investment they need to grow or even just preserve their wealth. At the WEALTH Arabia Summit 2017, pillars of the investment world gathered to discuss how to navigate these waters. Gary Dugan, Chief Investment

Officer, Gary Dugan & Associates; Diego Wuergler, Head Investment Solution & Advisory Middle East at Julius Baer; Sherif Wahba, Managing Director, Goldman Sachs; Taimur Khan, Senior Analyst, Knight Frank; and Giambattista Atzeni, Senior Wealth Director, Bank of New York

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We cannot continue with a two per cent bond yield and the markets telling us there is lots of growth. Something is going to have to give in 2018, and my best guess is equities. – Gary Dugan, Chief Investment Officer, Gary Dugan & Associates

Mellon, Anthony Taylor, Fund Manager, Emirates NBD REIT were joined on stage by moderator Robin Amlôt, Consultant, CPI Financial in front of a packed room of HNWIs, their representatives and investment professionals to discuss this pressing topic.

What is the biggest risk that investors are facing for 2018? “I think the biggest risk is correction,” said Dugan. “We cannot continue with a two per cent bond yield and the markets telling us there is lots of growth. Something is going to have to give in 2018, and my best guess is equities.”

Interest rates and inflation remain low in 2017. According to Wuergler, there will be some rises in 2018, but it will not be much. “We believe that interest rates will continue to increase over 2018, but this won’t be a massive movement. Inflation is under control, wages are not massively increasing, and this is valid in both Europe and the United States. So we believe that interest rates will remain at the moderate level, between one and two interest rates in 2018, and we are fully in line of the view of the market going forward,” said Wuergler. In a surprising moment, no one on the panel disagreed with Dugan over whether there would be a correction coming in 2018. Goldman Sach’s Wahba, however, did provide a caveat. “It’s a matter of magnitude. As Gary mentioned, there’s a lot of cash sitting on the sidelines. That’s what we’ve seen so far, when anything sets off, there’s a lot of cash that steps into to support the market.” There are some key political moments to keep an eye on, Warba continued. “One of the things to watch out for is the Italian elections in 2018. We worried less about the French election outcome because if you poled the French, more than 60 per cent like the EU. That’s not the case in Italy— it’s closer to 50/50. I think you’re going to hear a lot more noise then that could cause the market to take notice. Inflation is going to pick up for various reasons,” said Warba. Dugan presented concerns, with so much uncertainty, that if a correction does come, that panic could hit the markets. cont. overleaf

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WEALTH ARABIA SUMMIT 2017 cont. from page 19

“The thing that worries me is that, while we’ve had volatility that’s very low, we’re not used to significant corrections. Today, when the market moves two per cent, that’s significant. I don’t think psychologically the market is ready for a move of four to five per cent in a day. People’s long terms savings aren’t great enough to reach retirement. There is a huge sensitivity to downside losses, which could cause a panic when the market corrects,” said Dugan. “The market collectively has the memory of a guppie. Some of us remember not the last two, three, but the last four market crashes in the world,” said Amlôt. All of this is making HNWIs go back and reassess their risk exposure, according to Giambattista Atzeni of BNY Mellon. “What I see with my clients is the request to go back to look at the risk they are willing to take. Once you focus on strategic asset allocation and weigh the assets in your portfolio, and identify signals that you want to monitor, you can move forward. You need to see how the market responds to your own index, and when you see certain movements, respond to that. You may need to use more options and futures to short the market to address these things. There may not be a correction, but the most interesting part is that people are getting ready for one. They’ve learned to monitor the market and respond to that,” said Atzeni. Wuergler echoed the need for diversifying one’s portfolio. “Diversifying your portfolio is key. The issue currently is the interest rate yield,” said Wuergler. “People are still looking for yield. I find it interesting that investors always look in nominal terms. Ten years ago cash could yield five per cent, and investors would be happy with a portfolio generation seven per cent. Because of inflation, your real return would be two per cent. Today you can get three per cent real returns, but people still want to get seven per cent returns in the first place. That’s why people have moved into assets classes than can help you. We believe that it makes more sense to have a longerterm perspective, and to take advantage of short-term corrections to position yourself.” Real estate is still healthy, according to Taylor, especially in the developing markets.

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THE PANEL DISCUSSES THE LATEST TRENDS.

“If you look at the spreads you’re getting on in certain real estate aspects, there are markets that are very healthy. The UAE is one of them, and the Middle East as a whole. If you look at developed countries, that’s where it’s getting very close and it’s obvious to investors when those corrections happen. It’s coming in certain markets and that spread is something that we’re looking very closely at. In the market you can get seven and a half to eight and a half and cash. In developed countries it’s down to 50 to 150 basis points. It’s tightening. In the next two years, yields will move.” According to Taimur Khan of Knight Frank, investors are still interested in developed markets. “What we’re seeing is, in the real estate sector, clients are realizing that the yield lies in emerging markets, but they’re also putting their money into developed markets for capital appreciation and protection of their capital. It’s an economic issue. There is a decent level of capital preservation in developed markets, but an emerging market could go up, but could continue to struggle,” said Khan. “The locality of these locations becomes very important when looking at developing markets, with divergence is a key part of these markets.” According to Warba, with such uncertainty, investors should always take an individual approach—not only taking the advice from a group of experts. “Asset allocation is a very personal decision, and it is a very difficult one to consider when all markets are struggling. You have to ask, what is your level of loss acceptance? Is it ten to twenty per cent? With clients, we tell them

that there’s a one chance in a hundred of x happening. That’s an important question to ask yourself. One of the risks we have in 2018 is the cross asset allocation. We always think of diversification as buying bonds and stocks— what if bonds and stocks go down together?” said Warba. “Look at alternative investments. It’s important to look at all asset classes. Hedge funds may be important to look at in 2018. The balance between emerging markets and developing is more important than ever. Everybody is waiting for the correction and it hasn’t happened—so let’s think broader in terms of asset classes.” “It’s also important for us to educate the clients that diversifications is important in the long term but not necessarily in the short term. Think about the crisis in 2008. Every asset class was collapsing at the same time. We don’t have to push diversification in the short term. It’s not building a portfolio for the coming two weeks—it’s for the coming five to ten years, or for the coming degeneration. That’s where real diversification will happen,” added Wuergler. “Asset allocation is something that is personal, but it’s all about timing. When are you going to change your position? If you don’t change your position every day, such as when Trump took office, you’ll lose all your growth,” added Atzeni. “Many solutions out there were made in response to a previous crisis—so if you look for a perfect solution, you may find only a perfect fit for a previous crisis, not when and what the next crisis is going to be. That’s the real challenge.” “Every army trains to win the last war,” added Amlôt.

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WEALTH ARABIA SUMMIT 2017

Is alternative investment still ‘alternative’?

REPRESENTATIVES OF GULF CAPITAL, AL MASAH CAPITAL MANAGEMENT, INVEST CYPRUS AND PARAGON PREMIER INVESTMENT FUND SPOKE WITH WILLIAM MULLALLY ON STAGE THE WEALTH ARABIA SUMMIT 2017 TO DIG INTO WHERE THE ALTERNATIVE INVESTMENT SPACE IS HEADED

FIDAA HADDAD, ALANDE SAFI, MARIOS TANNOUSIS AND SAIKAT KUMAT SIT WITH WILLIAM MULLALLY.

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T

he investment landscape has changed. For many individual investors all around the world, a strategy of bonds and listed equities is not enough to ensure their portfolio reaches the returns that they need to grow, or even preserve, their wealth. Where are they turning? To the everexpanding world of alternative investment. At the WEALTH Arabia Summit 2017, a panel featuring two of the top voices in the GCC, as well as two vital international voices, discussed this shift. Saikat Kumar, Partner & Senior Executive Officer, Al Masah Capital Management; Fidaa Haddad, Managing Director – Private Debt and Structured Capital, Gulf Capital; Marios Tannousis, Deputy Director General, Invest Cyprus; Alande Mustafa Safi, Managing Director, Paragon Premier Investment Fund, all gathered for the event. With alternative investment gaining so much more focus in the investment space, the question arises:

Are alternative investments truly alternative? “Alternative investments are not alternative,” said Kumar. “Not for high net-worth individuals, UHNWIS, and family offices. There’s been a huge shift in participation in private equity. It has grown substantially. It is no longer alternative, and it is going to be mainstream at this point in time and it is going to increase.” “In 2012, $600 million was the amount of participation in alternative investments. In 2017, that has doubled,” Kumar continued. “The reason for this is that, in terms of the risk adjusted return, investors are looking for higher returns. In traditional investment, they cannot see the kind of investment that they want at the end of the year. Allocations are increasing. Investors are very keen.” Haddad, however, provided a dissenting voice. “I disagree. I think alternative investment is and will remain alternative. Today it is not accessible to everyone.

What the average individual can see is listed equities, bonds, and bank deposits. What you’re seeing now are the four types of alternative investment funds: You’ve got infrastructure funds, real estate funds, private equity and private credit. Normally when an investor looks for high yield bonds, they are looking at a premium of anywhere between 200 to 300 basis points. The reason I think they will stay alternative is these investments are illiquid. There is some liquidity, but the majority of alternative strategies are illiquid. I do agree that is has become mainstream for sovereign wealth funds, pension funds and more.” Marios Tannousis provided insight into his market, which features a vibrant economy and increasing international investment attention. For Cyprus, alternative investment is increasingly a focus. “In our experience, most of the investors are coming to Cyprus into the alternative cont. overleaf

THE PANEL DISCUSSES THE LATEST IN ALTERNATIVE INVESTMENT.

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Not for high net-worth individuals, UHNWIS, and family offices. There’s been a huge shift in participation in private equity. It has grown substantially. It is no longer alternative, and it is going to be mainstream at this point in time and it is going to increase. – Saikat Kumar, Partner & Senior Executive Officer, Al Masah Capital Management

cont. from page 23

investment space,” said Tannousis. “Of the number of funds domiciled in Cyprus, about 85 per cent are alternative investment funds. They invest across economic sectors. Investing in the shipping industry, real estate, industrial projects and now increasingly innovation start ups are very common in Cyprus. Investors are looking for good returns in the medium and long term.” The market in which Alande Safi fund operates, domiciled in Australia, is experiencing a similar trend of alternative investment movement. However, different from in Cyprus, HNWI investors in Australia are looking more to preserve their wealth than chase high returns. “What I am seeing happening in Australia with HNWIs is that preserving capital is the new alternative investment stream. It’s about maintaining the capital more than anything else. Now with an influx of funds from China, Australia is looking into alternative investments, and the country is looking for foreign investors to come to their fund streams to invest into these projects, which comes with huge benefits for the investors in terms of tax breaks and more,” said Safi. Capital preservation may be the only way forward, especially as private equity returns start to drop, according to Haddad. “Historically, in private equity globally targets returns above 20 per cent total ROI. What’s going to happen going forward is that those returns will compress to the midteens. Prior-credit funds can range between six to seven per cent all the way up to 16 per cent on high-yield structures. The one thing people are allocating more now in private credit, which is about capital preservation. With credit, you can create structure that investors can come into to protect downside.

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They’ll be happy to get into the 10 per cent rate with that sort of protections.” Where are people targeting their alternative investments in Cyprus? Tannousis shed light. “We are seeing an increasing interest in the healthcare space. There are interesting projects in wellness and assisted living. Fintech and technology are also being developed very fast. Healthcare will move quite importantly and fast, as will clean energy projects, such as solar, wind and other types of that sort. These are all good for investors, as well as working towards solving the challenges are planet faces. It is also important to see the strengths of such alternative investment practices with family offices and sovereign wealth funds.” Healthcare too is an important alternative growth are in the UAE, according to Kumar. “We have seen many patients used to go for treatments outside, but the UAE has a lot of good infrastructure for healthcare and healthcare tourism. There is a very good opportunity going forward in that space, for at least the next five to seven years.” Some projects, however, price out average HNWI investors, according to Safi. “We are segmenting into infrastructure projects, including government and property development infrastructure projects in Australia. Chinese investors are realising 30 per cent returns in Australia on property investment. These opportunities, however, require capital.” It is not enough to look for growth industries and invest blindly, however. Even in areas that are seeing high investment returns, it is important to both diversify and look deeply into the businesses.

“The way an investor should look at it is, how do I diversify my risk across, geographies, industries, asset classes, etc.? There are many different types of risk to look at. If I were to look at something in the UAE, our first risk understands the quality of management. At the end of the day, private equity are backing businesses, and business are made up of teams. We need to make sure we are comfortable with the team that is going to deliver the business plan and understands the industry that it is in,” said Haddad. Kumar echoed this strategy. “We invested in a healthcare platform a few years back that was providing long-term acute care for UAE nationals. Historically, UAE nationals went abroad for treatment for long-term care, and they were occupying ICU beds for a hospital. Someone that’s going to be in a hospital for the rest of their life doesn’t need to live in a hospital. They can live in a long-term care facility. With that investment, we tried to understand the team, what they were trying to achieve in their business model, and understand the industry. We then tried to structure the investment around that so that our investors would feel comfortable,” said Kumar. To do that correctly, according to Haddad, it requires a lot of patience. “For me, the most powerful thing is building a connection with the entrepreneur. What I mean by that is, sometimes it doesn’t take a second to do a deal; it could take nine months. All along what you’re looking at is how the entrepreneur or the owner behave and how did they behave in the past. Understanding the individuals takes time and patience,” said Haddad.

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WEALTH ARABIA SUMMIT 2017

Investing with impact

AT THE WEALTH ARABIA SUMMIT 2017, A PANEL OF EXPERTS OUTLINED SOME KEY COMPANIES AND AREAS THAT INVESTORS CAN FUND SHAINOOR KHOJA, MANAGING DIRECTOR, BETTER BUSINESS ENTERPRISE; HEATHER HENYON, INVESTMENT COMMITTEE, NEXTWAVE IMPACT FUND; ALAA ODEH, SENIOR ASSOCIATE, GLOBESIGHT; LUCY CHOW, DIRECTOR, WOMEN’S ANGEL INVESTOR NETWORK (WAIN)

I

mpact investment is, at its roots, about providing a measurable benefit to the society or the environment. In today’s investment landscape, more HNWIs than ever before are turning to impact investment as a key part of the future, ensuring both societal benefit, returns, and sustainability. At the WEALTH Arabia Summit 2017, key investors and representatives in the space gathered to discuss the issues facing impact investment with moderator William Mullally. Shainoor

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Khoja, Managing Director, Better Business Enterprise; Heather Henyon, Investment Committee, NextWave Impact Fund; Alaa Odeh, Senior Associate, Globesight; Lucy Chow, Director, Women’s Angel Investor Network (WAIN) each approach the space from a different point, each of whom shared their background. “I started investing with acumen fund, which is a fund that invests in companies with a view to help alleviate poverty in the simplest terms. Today I represent WAIN, and

we don’t focus on impact companies, but we certainly have invest in companies that have an impact focus,” said Chow. In addition, Chow ’s organisation WAIN provides social impact specifically by focusing on women, who are underserved in the region in terms of investment. “My background is that I came from a fund for economic development, which in my mind is the top impact investor that goes to areas that nobody else wants to go to, but has to check the profit box and the

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socioeconomic growth box as well,” said Khoja. “What I learned through that model, in all different countries, that it is possible to operate at the highest level so that not only does your product and service give impact, but the value changes that you bring in and the way that you do business and the way you engage the entire ecosystem can be very impactful. There are multiple avenues for impact, and through that work I have found that many organisations were coming to me and saying how do we look at profit with this

lens, and how do we pool our resources? I then set up Better Business Enterprise in 2012 to help private sector, governments, non-profits, investors and family officers to look at investment through this lens.” Odeh, too, work s d irectly on development of impact businesses, and has found challenges in making sure the ideas, though well-intentioned, are also sustainable past the initial five-year window. “I bring a global development and international development background in my career. I have worked in the US as well as in MEA in focusing on economic development , social development , working with governments, NGOs and private sector companies on how they would like to bring development to these areas. Some of the things we have seen in the international development sector is that you aren’t as sustainable as you’d like to be. The donor will come in, make an investment, sit for five years, but then once they leave, the organisation is not able to sustain the contact and operational expertise to make the initiative continue,” said Odeh. Henyon is well-versed in the space. “I been working on impact investment for almost 20 years on Wall Street and working in microfinance for 10 years. The NextWave impact fund is based in the US, and we invest in early stage impact businesses that can work across sectors such as agriculture, financial services, food, energy, water, education and more. Since I have been in the space, the sector is really maturing, and I’ve been very impressed by the types that I’ve been seeing,” said Henyon. “The elephant in the room is why is every single panel not about social impact, why is every investment not focused on how it’s going to impact the environment and its society?” said Mullally. According to Chow, it is a combination of confusion and trouble in direct measurement of impact. “There’s a real philosophical debate that says that if you invest in social impact that takes away from philanthropy and that if you do invest in that space, how measurable is it? These questions make people shy away,” said Chow.

Khoja believes that much of the trouble that the space has had in the past is all sectors have not been working together to the degree they need to on the problem. “We’re coming along a continuum. There are push and pull factors. I think we’ve been through a capitalistic model and it’s not really worked tremendously well. People have become distrustful of it. The next generation of investors are demanding that it be a fairer player field and a more inclusive playing field. I think women are also becoming more engaged, and are bringing that social impact lens in. There’s a great deal of learning that’s coming through. “To tackle some of the hardest problems that we are facing today, it’s not a one sector or a one person journey. The government needs the private sector and SMEs. We need a multi-sector, multi-discipline approach. The measurement of that is behind but it is coming along. In one of my projects in Afghanistan, the measurements were, how much of the GDP did we create? How many jobs did we create? How many SMEs did we help create?” said Khoja. While many focus on philanthropy, believing that is a better way to affect society than investment for profit, according to Alaa, philanthropic donations do not guarantee impact. “I think the biggest misconception is that if I’m making a philanthropic donation, that will create social impact. If I’m going to make an investment, I’m trying to make a profit, so how can that be linked to helping a community, or a farm in Kenya? If you look at the donor space, globalisation has allowed youth in Somalia to learn the same skillsets as those in the US.

WHERE TO INVEST

One company that is ripe for investment is one that Odeh works with in Somalia. “I want to share an example—SolarGen Technology Solutions. It is the sole solar power solutions provider in Somalia, which has been ravaged by conflict. As recently as last month, they launched a solar powered water plant, which is actually able to create more water than the government is able to bring in. This month they are going to launch

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THE PANEL DISCUSSES THE LATEST IN IMPACT INVESMENT.

the first solar powered grid, which will power 175 households. This is only one actor in Somalia that is able to generate electricity, water and things that will make the economy flourish. As an investor, you can come on, work with the donors, and help advise, through consultancy, how to continue to provide for the communities, which will eventually provide profit return.” Healthcare for low-income workers is also a place where investors can have impact while also reaping huge returns. “I work with five family offices that are coming together to give blue collar workers in the UAE access to quality healthcare. This is where I find this to be an exciting time, because this is pure business. They’re in this to create social impact but not to give up on any financial returns. IT’s a private company, but what you put in, you get a seven to nine per cent annual return and 4x on exit at the end of five years. Now that is an investment,” said Khoja. “Another company that I’d like to point out is Charicycles,” Odeh added. “It’s a company that takes bicycles, refurbishes

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them, develop them into brand-new looking bikes, and sells them for profit to the general public in Dubai. One of the co-founders spent a lot of time in refugee camps, and they saw bicycles needed by refugee kids to help stimulate them and give them a hobby. Now, for every five bicycles they sell, they give one to a child in a refugee camp. They’re making great returns and they’re solving a challenge that NGOs couldn’t. With this investment, you can have a direct impact and not wait too long for profit. For many investors, a fund is the best place to look, allowing for immediate diversification in impact investment. “I think the challenge is scale. With a lot of family offices, funds make sense for impact, because you can get a pooled approach and diversify across different asset classes. There are ETFs on the stock market that have a double bottom line target on the way to private equity investment. I work with an organics producer which is familyowned, and the investors in their debt are getting about three to five per cent per year,” said Henyon.

The system now needs to be changed, according to the panel. “The current economic paradigm is broken. It doesn’t work. The NGOs haven’t achieved what they said they could, many governments haven’t taken care of the poor and the hungry, the labor market has gone through a massive shift. Given the new world that we’re operating in, we need new models. There is an opportunity for impact companies to show they can work, make money and be sustainable,” said Henyon. Khoja echoed that sentiment, adding that the United Nations was not an organisation built for today’s world. “There’s the misconception that when you’re dealing with these types of problems you’re not meant to be profitable. It may take a little longer to get to profitability, but some returns can in the high double digits. Donation money is going down. The UN was set up 80 years ago in a country-specific way. I think the world has progressed. The body that deals with these issues perhaps has not progressed.”

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WEALTH ARABIA SUMMIT 2017

Where to invest in blockchain AT THE WEALTH ARABIA SUMMIT 2017, REPRESENTATIVES FROM ACROSS THE FINANCIAL AND TECHNOLOGY LANDSCAPE DISCUSSED WHAT INVESTORS NEED TO KEEP IN MIND WHEN APPROACHING BLOCKCHAIN AND ICOS

B

lockchain started as a whisper, and has now become the loudest voice in the investment world. It was not that long ago that cryptocurrency—blockchain 1.0, as it is often called—was dismissed as a fad. Soon, as blockchain evolved as a technology, and cryptocurrency matured to valuations that no one thought possible, it became the hottest topic in almost every industry. At the WEALTH Arabia Summit 2017, moderator William Mullally discussed the latest developments in the world of fintech and blockchain with Evgeni Borisov, CEO & Founder, VIMANA; Saqr Ereiqt, Senior Management Consultant, IBM Middle East and Henri Bergstrom, Advisor, Business Development, Abu Dhabi Securities Exchange. Each came to the panel with a different background. “I’ve spent a quarter of a century in the securities business,” said Bergstrom. “I worked 25 years with Nasdaq, and that is a technology company more than a stock exchange nowadays. One part of my effort there was to introduce a blockchain-based system. This was a very complicated process with investors located globally. Blockchain was the perfect system to facilitate this. As I represent a stock exchange, Stock Exchanges look at any assets the same way—they need to be regulated. ICOs

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(Initial Coin Offerings) are just one type of blockchain—there are other type of cryptoassets as well. We look at all of these from the exchange perspective, and we are doing everything we can to work towards that. We look at things very proactively.” Ereiqt made a larger pronouncement—he is not just an analyst, he is blockchain evangelist. “I call myself a blockchain evangelist because I can’t call myself a blockchain expert—no one can, honestly. Blockchain came to me two years ago from IBM research, which is

one of the largest on the planet. I came to blockchain from an engagement we had from the government to look into new services.” Ereiqit was quick to make the distinction between blockchain 1.0 and its later innovation. “Blockchain is not cryptocurrency and cryptocurrency is not blockchain. What cryptocurrency is to blockchain is what cement is to a wall—just one of the applications. Blockchain is are smart contracts and a shared ledger—crypto-currencies are just one of the applications,” said Ereiqt.

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EVGENI BORISOV, CEO & FOUNDER,VIMANA SHEDS LIGHT ON HIS PROJECT TO USE BLOCKCHAIN AS PART OF THE FUTURE OF URBAN AIR MOBILITY.

Borisov’s company, VIMANA, is a working example of how blockchain will change the future. VIMANA is working on urban air mobility—a new sort of personal air transport that runs on a blockchain system to ensure safety. Borisov himself is sees blockchain as a true signal of where the future is headed. “If I can express my personal feelings about blockchain, the global economy is really suffering from the lack of the drivers it is supposed to have. Cryptocurrency

is a way to monetize, and blockchain is a way to integrate your business to the new social paradigm of the future society,” said Borisov. While VIMANA may be changing the way people transport themselves from place to place, not every innovation in the blockchain space will be a disruption for industries. “I don’t believe it’s a disruption because I don’t think there’s anything you can do with blockchain today that you can’t do with any type of technology application,” said Ereiqit.

“What it is though is a foundational change. You’ll be able to do everything that you do today, just much faster. Do you need to be worried today? Well if your business is just a middleman that doesn’t provide an added service, then you need to be worried. What Blockchain is going to do is allow me as a consumer to interact with whomever is providing me a service. “For example, Walmart started using blockchain for food production, to track where exactly food comes from. cont. overleaf ISSUE FORTY FOUR - DECEMBER-JANUARY 2018

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If I can express my personal feelings about blockchain, the global economy is really suffering from the lack of the drivers it is supposed to have. Cryptocurrency is a way to monetize, and blockchain is a way to integrate your business to the new social paradigm of the future society. – Evgeni Borisov, CEO & Founder, VIMANA cont. from page 31

Before it would take them weeks to figure this out. With blockchain, they can do it in seconds. With trade finance, there are companies like Mersk. Blockchain doesn’t help them provide new services, but with blockchain they are able to trade $200 dollars per container that they ship, with 70 million containers shipped a year. Their process is the same, it’s just much cheaper and quicker. Bank Santander said they’re going to save $20 billion from the application of blockchain.“ The world is being changed by blockchain, but the much of the world has not caught up, Bergstrom pointed out. “As of today, none of the regulators anywhere in the world have recognised ICOs as an asset. There are many regulators working on this, and someday I’m sure that will be done. That doesn’t mean however that if you have an ICO that it will be insecure, but it may not be backed by a proper agreement. One person put up an etheriumbased product with a warning that no one should invest in their product as nothing was backing it. It quickly garnered $100,000 in investment.” Not every ICO is made on a lark— the most essential ICOs are much more carefully managed. “Some of these ICOs are people sitting on the couch waiting to see funds come in and see how things go. But 10 per cent are the backbone of the market, and those companies are building the future of this market,” said Borisov. Where should investors be putting their money? The panel was retiscent to offer direct tips, but Borisov gave insight into where his company is looking,

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“I’m not trying to suggest where someone should invest, but if I were in your shoes, I would look towards infrastructure ICOs. A lot of funds are moving towards that way—we are also looking towards that,” said Borisov. When looking into investing into an ICO, look into those that are more than just an ICO—the ones that have built a full ecosystem around them. “There are very interesting ICOs out there, and the most interesting ones are the ones that have created an ecosystem. These are a tool to pay for something. In Russia, there is an agriculture developers with whom you can use ICOs to get products from their farms. PowerLedger was fantastic from an ecosystem perspective because it included power plants and power lines, and the idea behind it was to create environmental friendly democratised ways to invest and use power. Another example is in the art world. In one system people are using the money raised by an ICO to invest in fine art. Maecenas is an open-source blockchain platform that ‘democratises’ access to fine art. It is open to everyone.” Ereiqt echoed this sentiment. “Look at the use case. What are they doing? Are they just promoting an idea or are they doing something that is going to change something? What is the application of what you’re investing in? What we’re doing is creating a new playing field. In that playing field, there are going to be new players. Who do you see as the players that are going to be successful in this, and who are the team behind it? Most of the time, these ICOs are start-ups. Find out who is behind it, how they’re applying it, what the thought process does it bring to the table?

Do they issue white papers? Etherium was $8 dollars, and it’s over $400 dollars today. While there is a lot to be gained, there is a lot to be lost as well. Be careful, and analyse what you’re investing in,” said Ereiqt. “Don’t throw money at a buzzword, and don’t treat every change as if it’s only a buzzword,” said Mullally. But are ICOs secure? Until the mainstream regulatory system is more involved, the answer still remains no. “If you really want to have a secure bitcoin, then it needs to be backed by a central bank. From our perspective as a securities exchange, ICOs are definitely a disruptor, which you will have to take and capture back as a regulated asset,” said Bergstrom. Bitcoin has raced over $10,000 in valuation in late 2017. The question on all investors minds is whether the currency is headed for a bust. What are the signals? Ereiqt believes there are some ways to see that the growth is not sustainable at its current rate. “Bitcoin is compared to the 17th century tulip bubble. Where does a bitcoin come from? It is mined. How do they do that? They use processing power, which uses energy. Bitcoin miners are currently using more power than the Sultanate of Oman. At the current rate that we’re going, by 2020, the bitcoin network would require the entire power consumption of the planet. You have to keep in mind these aspects when you think about what could happen to bitcoin. I’m not going to call bitcoin a fraud like my friend at JP Morgan did before they decided to invest in it. But there is only so much power in the world—and that’s something to take into consideration,” said Ereiqt.

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WEALTH ARABIA SUMMIT 2017

TOO OFTEN, THOSE WITH WEALTH WAIT UNTIL IT’S TOO LATE TO PROPERLY PLAN OUT THEIR SUCCESSION.

Don’t wait until it’s too late SUCCESSION PLANNING MIGHT NOT BE THE FIRST THING AN HNWI WANTS TO THINK ABOUT, BUT IT’S AN ESSENTIAL PART OF PRESERVING WEALTH. AN ALL-STAR PANEL AT THE WEALTH ARABIA SUMMIT 2017 ANALYSED THE ISSUE

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or most high net-worth individuals, wealth is accumulated and preserved with one goal in mind—leaving one’s children in a better position than they themselves started out with. As a result, the issue of succession planning—passing that wealth on to the

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next generation—is a key focus for every HNWI. In a region such as the GCC, this is not always an easy task. With so many nationalities, differing regulations in different countries and assets both on and offshore the question is—just how complicated is it?

At an all-star panel to close out the WEALTH Arabia Summit 2017, this issue was tackled head on. Moderator Robin Amlôt, Consultant, CPI Financial was joined by Piers Master, Partner, Charles Russell Speechlys; Sean Hird, Director, DIFC Wills & Probate; Fiona McClafferty, Private Client Tax Specialist, Deloitte, and Karim Ghandour, Founder & Family Succession Strategist, Legacy Line Family Office to discuss the latest developments. “I think it gets as complicated as you want it to be,” said McClafferty. “I think that if you do no planning, if you don’t think about it all, if you have no will, or if you don’t discuss with your family what you want to do, then it gets super

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complicated and very expensive. What I can guarantee is that if you speak to your family and if you start thinking about these things now–it’s not morbid, you’re actually doing a favour to those that you’re leaving behind–just start understanding what they want to achieve and also make sure that they understand what you want to achieve. I’m hoping, having listened to the blockchain conversation, that we’re all not going to be done out of a job as middle men because there is so much… each family is different, whether they’re GCC Nationals or expats, or if they live in the US or Europe, to avoid complexity it’s all in the preparation." Master agreed. “I think it’s very import, especially for families from this region to recogonise that there is quite a significant distinction between succession planning for international assets and succession planning for local assets and knowing the different solutions for each of those. The solution for local assets, if you are an expat, may well be a DIFC Will, which we will talk about in a minute. I think the solution for international assets is much more likely to lie in the area of trusts… Trusts are something that people don’t necessarily understand very well, but they are incredibly useful, and they are incredibly useful for people from this region because Islamic Shari’ah succession laws generally do permit you to make gifts in your lifetime, including to a suitably established trust which can be fully Shari’ah compliant.” “Quite a lot of our work as lawyers on dealing with succession planning involves setting up trusts, which aren’t in any sense an attempt to overcome Shari’ah. We make sure they are vetted by Islamic scholars and that they have the necessary features to ensure that everyone is comfortable that we are doing a Shari’ah-compliant plan. However, that doesn’t work so well for the local assets. So for the local assets the kind of planning you tend to look is more family-governance based solutions. The issue is that currently this may change and there are all sorts of interesting developments around ADGM foundations, DIFC trusts, and similar

things like that. But for the moment it’s quite hard to do lifetime structuring with trusts for local assets so the solution tends to be family governance… making sure that families get by, and making sure that you really have those difficult discussions. Ghandour provided some perspective on the important of Shari’ah on the subject in the region. “Initially we used to advise families on estate planning and then we realised that local families, especially in Saudi Arabia and UAE, when it comes to religion obviously it is very clear and very simple, unlike what a lot of people think. When it comes to distribution, the Quran is very clear on how assets should be distributed. But the issue becomes governance, which is not addressed in religion. Even in the early stages of Islam we had issues in terms of who would succeed, post the death of a prophet. Basically this [governance] is the real conflict… the inherited conflict around families. If we distribute everything according to Shari’ah law or according to the trust outside, how are we going to govern this? That’s the big issue. We have multiple dimensions. Lots of the knowledge we know about governance and the things we’ve learned about governance came from North America and Europe and it focused on business… on family business… but it doesn’t really address the dynamics of a Middle Eastern family, or an Indian family, or a Chinese family, and that is something we are learning as we go, it’s very exciting. So that’s the interesting stage we’re in. And then we have millennials… that’s another dimension that we’re dealing with in governance, so we have to take that into consideration,” he said. DIFC Wills and Probate Registry was a major development in the UAE succession landscape, giving expatriates the opportunity to create wills that were not governed by Shari’ah. “Back in 2015 there was recognition here in Dubai that the key thing that people were looking for is certainty and that certainty comes through trust structures or through other mechanisms,” said Hird, head of the initiative. “The key thing that everyone is looking for is certainty and what

the Dubai Government set up back in 2015 was really a system of registration whereby, for the non-Muslim community at least, they could register their wills and get that will enforced through the DIFC courts to provide the certainty that people were looking for. So it again just sort of reflects the innovation here in the UAE, particularly here in Dubai, which is leading to deliver that certainty and although we’re talking about Dubai and the initiative of the DIFC courts for registration, we’re also seeing this reflected elsewhere in the UAE. It was only about three or four months ago that Abu Dhabi also created a registration system for registering wills to provide the certainty to provide the non-Muslim community and investors here to get the certainty that they’re looking for.” McClafferty echoed that point, signalling that the message is not specific to anyone in particular—anyone should start thinking about a will. “One thing I will say to anybody anywhere is please make sure you have a will, whether it’s with the DIFC or onshore or in your home country. Most of my clients are GCC Nationals and so what we’re really talking about are the complexities and conflicts between Shari’ah succession and tax because invariably you have a family member who is married in America or is an American or you’ve got a child in university or interning in the UK or the US and that’s really where things get a bit tricky–where you’re looking at locally structured assets with a tax hat on. Going forward, you mentioned regulations, with reporting standards coming in (in Dubai, Saudi, Bahrain, Kuwait, Lebabnon, and Qatar) we’re going to be looking more and more at structuring and thinking with a regulatory hat and a tax hat as well as trying to work out the most efficient succession plan.” The biggest problem remains that these issues are not tackled often enough proactively. For most succession issues, the experts only weigh in once the issue has come to pass. “When I see people it’s often too late—they’ve already bought something and they have a problem or they have inherited something and they already have a problem,” said Ghandour.

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INVESTMENT

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Bitcoin, the asset class of the year HUSSEIN SAYED, CHIEF MARKET STRATEGIST AT FXTM WRITES FOR WEALTH ARABIA ABOUT THE YEAR'S BIGGEST STORY

cont. overleaf

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INVESTMENT

I have never seen an asset that moves from a bear market (a drop of more than 20 per cent) to a bull market in one day, and this shows how volatile the path will be going forward. If you are a faint-hearted investor, stay away. – Hussein Sayed

cont. from page 37

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itcoin has been the world’s hottest financial topic in 2017. The cryptocurrency surged more than tenfold this year, with its market capitalisation exceeding the annual output of economies like Greece, Czech Republic, New Zealand and Portugal. If you treat the bitcoin as a stock, the market cap at the time of writing crossed $200 billion, meaning that it has become bigger than Citigroup. Despite the many warnings from central banks, regulators, economists, and bankers, the price blew past $12,000 and is still going up. Every day we hear comments that bitcoin is a bubble that will burst as soon as prices are not justified. Well, I totally agree that no financial model can justify the price of bitcoin. The cryptocurrency is backed by nothing, so even a price of $1 shouldn’t be justified from a fundamental perspective. This is to say that you cannot compare the new asset to any traditional one, whether it’s currency, commodity, or a stock. The price is simply driven by investors’ hype, speculations, and the belief by some that it’s going to be the future global currency. The race to include bitcoin future contracts in exchanges like CBOE, CME, and Nasdaq meant the cryptocurrency is becoming a mainstream financial asset, indicating that it’s just about time for the birth of the first Crypto ETF. While the news initially seems like a bullish signal, it isn’t necessarily the case. An investor may go long or short on a futures contract, and it will be very interesting to see whether big investors will buy the bitcoin story or see it as the biggest short opportunity.

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HUSSEIN SAYED, CHIEF MARKET STRATEGIST, FXTM

I have never seen an asset that moves from a bear market (a drop of more than 20 per cent) to a bull market in one day, and this shows how volatile the path will be going forward. If you are a faint-hearted investor, stay away. Despite the incredible surge in price, brick and mortar stores have been very slow to

accept it as a method of payment. This is what worries me most. If we did not see growth in accepting bitcoins as a method of payment, then it is not serving its purpose. bitcoins are currently being used to make money rather than using it as money itself. This trend may not last forever, it’s either the world accept it or we’re getting closer to the end.

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Not your copy? WEALTH Arabia is a controlled circulation magazine delivered directly to specific, named HNWI individuals across the GCC. Institutions may also arrange bulk purchase orders of the magazine and its supplements to circulate among internal and external stakeholders. If you wish to arrange regular bulk deliveries, please contact subscriptions@cpifinancial.net for terms.

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HNWI INTERVIEW

Egyptian megastar Hend Sabry talks philanthropy WEALTH ARABIA SAT DOWN WITH LUXURY FASHION ICON, ACTOR AND UN AMBASSADOR HEND SABRY AHEAD OF THE IWC FILMMAKER AWARD CEREMONY IN DUBAI

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ould you tell me about your work with the United Nations?

I’m a World Food Programme ambassador. I have been since 2009. We Feed People— WFP! During a humanitarian crisis, we try to secure food for urban refugees, displaced populations, or even people who are living in regions of conflict. We are of course neutral as a UN organisation. We are a logistical organistion which means we have to deal with planes, ships, and trucks. We have to deliver food to sometimes very remote areas. We also have other programmes such as food for schools or food for work, which are customised programmes depending on where you are in the world. You don’t need to be in a conflict zone.

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We provide food reassurance for people who are food insecure in exchange for school attendance for children, or work for adults. Those are programmes that are dear to my heart. They are very successful in Egypt, Tunisia, Jordan and Palestine, where we have voucher programmes for regions where the local economy is weak and needs to be strengthened. We work with local grocers, local food markets and they provide food to the most food insecure populations. It’s a very dynamic approach—it’s not just feeding for feeding. We try to see food as a basic need that needs to be met if you want to evolve or if you want to work with local populations to educate them and to give them more freedom and more autonomy. For people

to do that, they can’t be hungry. You can’t be hungry and go to school—an empty stomach does not learn. This is my work.

I imagine it’s incredibly fulfilling.

It’s one of the most fulfilling parts of my day and life. I try to be active not only with WFP but with causes that I believe in and causes that make me want to reach out to people through my platform on social media or when I talk to the press. When I want to raise awareness about something that I believe in, I always do it with pleasure and without holding back. I believe that is our role. We make movies, yes, but we make movies in a region that needs people to be more conscious of what’s going on everyday. This region needs young people

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who are more outspoken, who are act more in solidarity with minorities and with people who suffer. This is part of my job as well, I believe.

Where are your favourite parts to travel, when you’re not focusing on philanthropy?

Each new place is to me the most beautiful place I’ve ever seen. I say that every time I travel somewhere new. I’m a traveller—I like travelling. I like being lost in a city that I don’t know. I love travelling to beautiful places. I don’t have a most beautiful, but I have places that I feel more comfortable in or feel more myself in—Beirut is one of them, and Kerala in the south of India is another.

What are the proudest moments of your career?

I’m very thankful, proud and grateful that I’ve had many milestones in my career. Those milestones also happen to be milestones in Arab cinema. Movies like the Silences of the Palace in 1994, my first film and also one of the most important films of the 20th century. Films like the Yacoubian Building was maybe the first blockbuster that made it outside of Egypt as a commercial and critical success. These are very important for me. I’ve ben working since the age of 14, so I consider myself a lifetime actress. I don’t remember myself before that era.

What is your favourite restaurant? La Petit Maison in Dubai.

As a fashion icon in the region, do you have a preferred luxury accessory?

My IWC watches. In particular, the Portofino Chronograph model that I am wearing. I like the dark side of this day watch—it’s very practical and I can wear it either time of day.

What’s the best advice you’ve been given?

HEND SABRY

Do not feel guilty. Try to avoid guilt. Even if you work too much sometimes, if you try to reconcile between your family and work, never feel guilt, because guilt is your worst enemy.

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AVIATION

PRIVATE BUT BUDGETCONSCIOUS GI AVIATION IS PITCHING PRIVATE FLYING AS A COST-SAVING BUSINESS TOOL SAYS CAPTAIN PATRICK GORDON MSC, GENERAL MANAGER, GI AVIATION IN AN INTERVIEW WITH WEALTH ARABIA

GI

Aviation is the first company in the Middle East and North Africa that has obtained the necessary licencing to commercially operate single-engine aircraft. Captain Patrick Gordon MSc, General Manager, GI Aviation, even pointed to UAEspecific regulation that makes it illegal for single engine aeroplanes to operate after dark, from which GI Aviation has been successful in acquiring a complete exemption.

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The company is a little over a year old and is seeking to offer affordable private charter flights to the region. “I’ve been in the Middle East almost 40 years doing all kinds of VIP transport and charter flying,” said Gordon. “The history of charter flying here is that of big twin engine jets at least. There’s never been anything at the Uber-level to provide transportation to people, and that’s what we’re trying to do, to be the Uber in air transportation here.”

The key opportunity for this form of transport, Gordon believes, lies in the corporate market. “We’re looking at C-level executives on down. The Chairman of the board, if it’s a big enough company, might have access to, or maybe even his own, aeroplane. We’re looking at Chief Financial Officers, maybe the occasional CEO, Chief Operating Officers, something like this.” cont. on page 44

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RAL MANAGER, GI AVIATION

CAPTAIN PATRICK GORDON MSC, GENE

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AVIATION cont. from page 42

We’re trying to enter this aeroplane as a business tool at a cost-effective and efficient level. You want to take into consideration executive time cost and executive time value. – Captain Patrick Gordon MSc, General Manager, GI Aviation

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Although the cost of a flight might at first look appear to be in absolute numbers higher than that of traditional business class flights with an established airline, this is not fully taking into account all of the factors at play, argues Gordon. “We’re trying to enter this aeroplane as a business tool at a cost-effective and efficient level. You want to take into consideration

executive time cost and executive time value,” said Gordon. Executive time cost is simply the total cost to the employer of the executive, down to his total package, housing allowance, and ticket costs. There is no return on this cost for the company when taking the traditional airline route which requires an executive to be present at the airport for a longer period of time and also constrains transport times within an airline’s schedule. In addition, the value of an executive’s time can decrease significantly whilst taking a traditional airline route. “You come to the airline and you sit for an hour and a half at the airport. Eventually you get on the airplane and that’s a two hour flight that you can’t do anything on—there might be someone looking over your shoulder, you can’t do any business,” said Gordon. “Now on the other hand with us all that time on the aeroplane you’re with your own team, you can get ready for an upcoming meeting, you can debrief after the meeting.” One real-world example that Gordon highlighted was of a legal firm that GI Aviation has been in contact with. Whilst sitting on the airline, the firm is wasting valuable billable hours which don’t even necessarily have to be spent on the project on hand but on another project elsewhere. “When you figure all of these costs and it’s really an economical way to travel,” added Gordon.

Executive payrolls can often be somewhat expensive, especially in the Middle East, the proposition GI Aviation offers is to more efficiently make use of this cost. “It’s a business tool that’s affordable,” said Gordon. “We recently took a team of bankers from here to Riyadh. They did meetings in two different cities in Riyadh and then we flew them back. It’s really very easily done in a day. We had another request to go from Abu Dhabi to Kuwait to Bahrain and then back in one day. You can’t really do that very easily with an airline schedule and if you do it in a twinengine jet it’s going to be quite expensive. We’re kind of in that bottom end of the cost-range.” GI Aviation operates the Pilatus PC12-NG aircraft, a Swiss-made, single engine turbo prop aeroplane that seats between six and eight passengers. “It’s a really sturdily built aeroplane and the Swiss don’t produce at a poor quality. Whatever you buy that’s Swiss from their chocolates to their watches or their tunnel boring equipment, it’s all first rate.” Furthermore, passengers are able to relax aboard in the aeroplane’s BMWdesigned interior. Currently the company operates two such aircraft with a staff of six experienced pilots.

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LUXURY TRAVEL

A MODERN SPANISH CLASSIC WEALTH ARABIA VISITS THE MANDARIN ORIENTAL BARCELONA, TO WHICH BOTH LOCALS AND VISITORS ALIKE ARE INCREASINGLY FLOCKING

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o matter what you read on the internet, in guide books, in magazines such as WEALTH Arabia, there’s one thing you can only learn about a hotel when you arrive. Whatever the reputation of a luxury hotel chain is with international HNWI travellers, there’s a different sort of reputation that often goes unreported. The question you may ask yourself, when looking at those hotels, is this: What do the locals think? When WEALTH Arabia arrived in Barcelona, talking with friends and family that lived in the city, speaking with strangers at the airport, when it was mentioned that we would be staying at the Mandarin Oriental Barcelona, the faces of those we told immediately lit up. “That’s the best hotel in the city, good choice,” said one Barcelona native. cont. overleaf

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LUXURY TRAVEL cont. from page 47

The Mandarin Oriental Barcelona was opened in late 2009, located on the Passeig de Grácia in the heart of the city, surrounded by much of its most vibrant areas. The hotel is within walking distance of almost all of Barcelona’s great sights, and the rest are easily reached by the means of your choice. Guests can easily walk to the Gothic Quarter, Las Ramblas, and famed architect Gaudi’s Casa Milá and Casa Batlló. Though Mandarin Oriental is a global brand, the designers of the hotel were decidedly local—Carlos Ferrater, Joan Trias de Bes and Patricia Urquiola, who worked on the architecture and interior design, are all Spanish. Together, they renovated a building built in the mid 20th century and turned it into a gorgeous destination from which to base your travel to one of Europe’s great cities. 120 hotel rooms and suites overlook the street, giving a wonderful view of the city, day and night. If your window is not enough to see the city’s breathtaking views, go to the Mandarin Oriental Barcelona’s many restaurants, including Moments, which features neo-traditional cuisine of Catalan origin, overseen by multi-Michelin starred chef Carme Ruscalleda. The hotel also features the restaurant Blanc. Be sure to book your table in advance, as these restaurants are renowned by both international travellers and locals alike. On the rooftop is Terrat, we spent a memorable afternoon sampling exqsuitely designed beverages and small portions of food at the Peruvian restaurant. The spot offers views in every direction, and is one of the city’s best restaurants to soak it all in. Closed during winter, the food is chosen to be authentic by acclaimed chef Gastón Acurio. We recommend taking your last lunch at Terrat, as there are few better ways to say goodbye to Barcelona. The service throughout the property is on par with Mandarin Oriental’s standard of excellence, and the staff will be happy to accommodate your every need. The pictures of the suites speak for themselves—a lush, modern design that still feels Spanish, through and through.

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THE FOOD AND VIEW AT TERRAT, THE ROOFTOP RESTAURANT THAT SPECIALISES IN PERUVIAN FOOD.

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TERRAT FOOD PHOTOS BY JAMES MULLALLY.

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GOOD TALK

Engaging

Patrick Stewart SIR PATRICK STEWART TALKS ABOUT VISITING THE GULF AND GETS PERSONAL

ON VISITING ABU DHABI

“We went to the Louvre in Abu Dhabi, and if you have yet to see it—I know it’s only been open for a little more than three weeks—it’s sensational. The collection is good, but the way it is organized is what makes it unique—unlike any other gallery or museum I’ve been in.

ON THE UAE’S CHARACTER

“There is such kindness, such generosity, such welcoming and modesty. We’ve enjoyed it immensely.”

ON GROWING UP

“My home life was chaotic and at times dangerous, but the stage, I found, from the moment I stepped onto it, was the safest place I had ever been. This was for a number of reasons, none of which I knew at the time, but of course because of high class extensive therapy in Los Angeles, I know now what was going on. “In a play, there is a beginning, a middle, and an end. It is planned out, and rehearsed. There is no chaos. There are not any surprises. It is all known and predictable. Also, on stage, I was not being Patrick Stewart, of whom I didn’t have a particularly high opinion. I was someone else. I so much more enjoyed being someone else than being Patrick Stewart. It’s something of a confession, but I have to say, I still feel the same way about what I do.”

ON HIS FAVORITE FILM

“I didn’t know people made movies about me or families like mine. The world that those poor people in those tenements inhabited in On the Waterfront was not very far from my world. That’s when I had the enlightenment that cinema can also be about a world that is not fantasy, that is real and dark and painful and troubling. That was an important night in my life.”

ON BEING YOURSELF

PHOTO: SHUTTERSTOCK

“I was actually hiding for years and years, hiding because I was either afraid or didn’t believe that I had anything personal to contribute. I always listened to everybody else. Now, I am so fascinated by acting as a process of inner revelation, of the emotions and feelings being my own. I’m excited about anything that anybody asks me to do, because I can explore even further this personal, private, inner life, which I can share.”

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#44 - December 2017  
#44 - December 2017