The National

The weather will be variable – naturally

Groundbreaking research by Masdar Institute shows us how little we know about climate change

National Editorial

July 08, 2014

The El Nino effect in the Pacific is well-known by anyone who takes even half an interest in the weather. Less well-known – mainly because its discovery only occurred 15 or so years ago – is the Indian Ocean Dipole. Like El Nino, the IOD involves the regular movement of vast amounts of warm seawater over long distances, disrupting weather patterns locally and around the globe. This year’s patchy Indian monsoon, for instance, is blamed on the IOD having shifted to its “negative” stage, with the warmer water centring off Indonesia rather than to the west of the subcontinent.

As scientists learn more about such natural phenomena, the arguments about climate change become more complicated. What is the interplay between the man-made greenhouse effect created by CO2 emissions and the regular changes that occur cyclically in oceanic and atmospheric currents? Into the debate now comes some fascinating research from the Masdar Institute into climate variability – natural phenomena rather than human-induced climate change – as it affects the country’s rainfall trends.

As The National reported yesterday, the study published in the Journal of Hydrology, found that rainfall has actually been increasing in the UAE, except for a sharp drop observed in 1999 that corresponded to recorded changes in six climate oscillations. The leading scientist, Prof Taha Ouarda, said that these findings show that UAE rainfall trends were not associated with permanent climate change caused by human activity.

The Masdar Institute study helps underline how much science still has to learn about climate and the intertwined variabilities affecting the environment. But as the gaps in knowledge are filled, so can some of the uncertainties of weather and climate be smoothed out. Prof Ouarda claims his research will help predict rainfall patterns for coming years.

With so many hundreds of millions of people from Africa to India to South-East Asia all dependent on the Indian Ocean Dipole and the life-giving rains of the monsoon, more intensive research is desperately needed into its complex variations. It is truly astonishing that the IOD was only identified and given a name in 1999.

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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.”