US military to retain 'strong' presence in Middle East: Panetta


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KUWAIT CITY // The US military will retain a "strong presence" in the Middle East despite a strategic shift to Asia, the US defence secretary said yesterday.

The United States plans to deploy a majority of its naval fleet to the Asia Pacific along with other advanced weaponry but Leon Panetta insisted that a robust American force would remain in place in the Middle East.

Mr Panetta spoke to reporters aboard his plane before arriving in Kuwait City to discuss bolstering security ties amid tumult in the region and tensions with Iran.

"Let me assure you that the United States is strong enough that we can maintain a strong presence in the Middle East as well as in the Pacific," he said.

He acknowledged that the United States had to be "flexible" in managing its forces in a more austere era and that it would have only one aircraft carrier in the Middle East for about two months to allow for maintenance work on another carrier, the USS Nimitz.

The American military still had nearly 50,000 troops and warships positioned across the region, he said.

"But in the end, I am very confident that we're going to be able to maintain the ships and forces we need in order to respond to any contingency."

The United States has deployed more ships and aircraft in the Gulf over the past year after Iran threatened to close the Strait of Hormuz if western countries boycotted Iranian oil exports.

During his visit to Kuwait, which ends today, Mr Panetta planned to meet Kuwaiti leaders as well as some of the 13,500 US troops stationed in the country.

His visit is the first to the emirate by a Pentagon chief in five years.

"We share a history of cooperation that goes back to the First Gulf War," in 1991 that ousted Iraqi occupation forces, Mr Panetta said, calling Kuwait an "important partner".

"I look forward to discussing with the government of Kuwait how can we enhance that cooperation in the face of regional security challenges in the area," he said.

"Our presence in Kuwait and throughout the Gulf helps enhance the capabilities of partner nations, deters aggression and helps ensure that we're better able to respond to crises in the region."

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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.”