Gulf also proves to be fertile ground for repair centres



With the Gulf an emerging centre for global air travel, the region's growing airline fleets require ever increasing repair services.

While Dubai and Abu Dhabi's international airports have become magnets for global maintenance firms, the biggest investments have come from a UAE company: Mubadala Development, a strategic investment company owned by the Abu Dhabi Government.

Its Mubadala Aerospace division has made investments in Malta and other parts of the world as part of a strategy to become one of the biggest global providers of aircraft maintenance services.

With its two main brands, Abu Dhabi Aircraft Technologies (Adat) and SR Technics, the company hopes to establish a presence in the biggest markets including Europe, the US, Asia and the Middle East.

SR Technics' aviation maintenance facility in Malta is part of a strategy for the company to set up lower-cost operations in Europe to serve some of the continent's carriers.

It follows the 2009 closure of an SR Technics facility in Dublin, Ireland, on the grounds of cost.

SR Technics is also repositioning its Swiss facilities to offload labour-intensive services and focus on high-end, specialised repair work on aircraft components.

Mubadala's most recent initiative has been to create a financing arm, called Sanad Aero Solutions. Sanad's aim is to provide financing to airlines for components and engines, and tie the repair of this equipment into long-term maintenance contracts with its sister companies, Adat and SR Technics.

Last year, Air Berlin and Etihad Airways signed up for US$130 million (Dh477.4m) worth of financing provided by Sanad.

With a keen eye on the heavy spending on military aircraft in the region, Mubadala has also moved into the defence repair market.

Last year, it joined Sikorsky Aerospace Services and Lockheed Martin, both based in the US, to commit to an $800m military aircraft maintenance centre in Al Ain, called the Advanced Military Maintenance, Repair and Overhaul Centre.

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Abdullah Humaid Al Muhairi, Abdullah Al Marri, Omar Al Marzooqi, Salem Al Suwaidi, and Ali Al Karbi (four to be selected).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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