Last week the Swiss National Bank unexpectedly lifted the peg between the euro and the franc, causing carnage on the world’s forex markets and casualties in dealing rooms around the globe. The Swiss franc rose by nearly 30 per cent at one stage before settling back to a comparatively modest 15 per cent rise later – still seismic by forex market norms.
We know the alleged reason for the SNB’s move: the currency had been artificially held down by the bank’s interventions in the forex markets; and the vast amounts spent on euros to hold the franc down were distorting Swiss public finances and threatening hyper-inflation.
Poppycock, I say. The real reason for the move was to trap the poor souls heading off to the World Economic Forum annual meeting in Davos.
The timing was suspicious: just a few days before the first delegates were due to arrive, after they’d booked their air tickets and were therefore committed to the trip.
So all those masters of the universe would have to shell out an extra 15 per cent on the bare essentials during their stay – bubbly beverage, Michelin-starred dinners – and further enrich the wallets of the already wealthy burghers of Davos.
But they did not reckon with the electric financial brain of yours truly. In a master stroke, I paid my hotel bill in advance. And well before the shock rise in the franc.
So I got my stay in Davos at the old rate, earning a substantial saving that I hope my employers will see and appreciate when the inevitable time comes to claim my expenses.
But I doubt it, because the truth is that Davos is such an intrinsically expensive place at the time of the WEF annual meeting that even a 15 per cent saving is merely a nibble at the bill.
Davos is a perfect example of monopoly capitalism at work: the venue is built halfway up a mountain, with a necessarily limited accommodation stock, the affluent WEF-goers will pay whatever the hoteliers and landlords ask.
The other little trick they pull at this time of year is to force you to pay for a week’s accommodation, regardless of how long you’re staying at the WEF.
The annual meeting lasts three days, but the minimum chalet or apartment rental, or hotel stay, is one week. Isn’t there something supremely exploitative about forcing you to pay for something you have no intention of using?
On the other hand, you have to admire the native Swiss profit instinct. They know what the WEF attendees are prepared to pay – a lot – and they are going for it.
Just by way of example, my humble little room in a three-star hotel looks perfectly adequate. It’s got bed, bathroom and Wi-Fi, the real essentials. You tend not to spend much time there anyway, with the congress hall the focus of most waking hours.
But is it really worth the same as a night in the five-star beach-side luxury of Jumeirah’s Al Qasr hotel in an Arabian Deluxe King room? It costs about the same per night, I was staggered to calculate.
After the shock rise in the franc there was much wailing by Swiss hoteliers who feared they would be forced out of business as tourists stayed away in protest at the high exchange rate. Maybe some, in other parts of the country, will face some hardship.
I doubt that will be the case in Davos. The normal laws of supply and demand don't seem to apply there.
fkane@thenational.ae
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UAE currency: the story behind the money in your pockets
Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
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.”
