StashAway has raised the interest rate on its Simple portfolio to help savers build their wealth. Getty
StashAway has raised the interest rate on its Simple portfolio to help savers build their wealth. Getty
StashAway has raised the interest rate on its Simple portfolio to help savers build their wealth. Getty
StashAway has raised the interest rate on its Simple portfolio to help savers build their wealth. Getty

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StashAway raises cash rate to 4.5% to encourage savers

The move comes as banks in the UAE hold back on offering the savings benefits of interest rate rises to customers

Deepthi Nair
Deepthi Nair

May 23, 2023

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Digital wealth manager StashAway has raised the rate of return on its cash management portfolio to 4.5 per cent, as banks in the Emirates continue to hold back on offering the benefits of the UAE Central Bank’s interest rate rises to savers.

In an era of persistent inflation, leaving idle cash in traditional bank savings accounts can result in its gradual depreciation, StashAway said on Monday.

Previously, StashAway offered 4 per cent on its StashAway Simple portfolio.

“Earning higher returns on your savings should be simple and straightforward,” said Joseph El Am, general manager of StashAway Mena.

“With this rate increase, consumers now have a convenient and highly effective way to work towards their financial aspirations – whether they are saving for a big-ticket purchase, building an emergency fund, or simply seeking a better avenue to park their cash.”

This month, the UAE Central Bank raised its base rate for the overnight deposit facility by a quarter of a percentage point to 5.15 per cent from 4.9 per cent, after the US Federal Reserve increased its policy rate by 25 basis points as it continues to fight inflation.

While the cost of borrowing has risen in line with the interest rate increases, banks have been slower to pass on the benefits to savers.

In February, UAE low-cost robo-advisory platform Sarwa unveiled a cash account with a 3 per cent annual interest rate to help customers boost their savings power.

Sarwa Save is aimed at people who are about to start investing or investors who want to earn a return on their parked cash, the company said at the time.

StashAway Simple is a high-yield cash management portfolio that has no minimum deposit, no lock-in periods and no withdrawal or management fees.

The rate increase will provide customers with an opportunity to earn more on their savings amid market uncertainties, the company said.

Founded in 2016 in Singapore, StashAway expanded its operations to the UAE in November 2020 to tap into a growing segment of affluent investors looking for low-cost ways to build their wealth.

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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.”

Updated: May 23, 2023, 3:00 AM
Personal finance