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A financial planner examines the tendency of investors to invest a large proportion of their assets in their own country
Philip Portal

Oman is booming. The economy grew at 8.7 per cent in its Sixth Five Year Plan; GDP growth was 21.7 per cent in 2005 as against 12.5 per cent in 2004; the sultanate’s investment expenditure has been held at 25 per cent since 2004 ensuring that oil revenues do indeed help to build the longer term economy; stockmarket valuations remain low (10-12 in December 2005 and even lower today) by international standards despite a growth of 44.45 per cent in 2005; new markets are opening up, and tourism – supported by the Shangri-La project, the Wave and now the Blue City – is beginning to build strongly. The prognosis, which I fully accept, is that this country is set on a powerful course for growth – today and over the coming years.

As an international financial planner with 22 years’ experience in helping people with their personal assets, I spend my days in different countries discussing how people wish to invest their assets – for themselves, for their children, and for the pension and other funds they manage on behalf of others. What is striking in Oman at present, as in several GCC countries, is how the well-founded optimism over their country’s future leads some investors to go against so much that we have learned to value.

• We learn international diversification; some people invest only locally.
• We learn diversification of asset class, yet many local investors end up investing primarily in the local stockmarket and now the local real estate market.
• We learn to keep core assets in a ‘safe haven’ which will survive whatever catastrophe might affect the person’s work, property or country; there is a tendency here to keep these core assets in cash in Oman, which is where most of their lives are spent.
• We learn to have our assets under the personal care of someone we can trust; they trade on the net or through institutions where they usually have no long-term relationship and often have little real recourse when something goes wrong.

Are these tenets no longer valid – or should we simply ignore them when a country appears to represent such a golden investment opportunity as Oman today? My answer is that these tenets have a strong value, although they need not necessarily apply to every investor.

I am concerned, and I have been so throughout the past three years while the markets here have moved to new highs. Why? Because I believe there are people who have ‘all their eggs in one basket’ and are not aware of the potential risks entailed. So one day they may regret it.

Consider the following facts:

• Oman’s stockmarket represents 0.05 per cent of the global stockmarket (US$14bn vs US$28tn), and only 11.8 per cent of that of the GCC’s combined stockmarkets.
• Its economy represents under 0.1 per cent of the global economy.
• Measured even with an oil price of only US$32 just one sector (the oil sector) is expected to contribute 70 per cent of expected revenue in Plan 2006. This is but one sector among over 20 others in a modern economy – so the economic base is still, of course, very energy dependent.

I could go on. What is my point? It is that many investors take on risks which they underestimate; and they only realise when it’s too late. Any one country – including my own (the UK) – is but a small part of the global economy today.

And it is subject to economic effects and many other effects which are not of its own making. If anyone doubts this, think tsunami, or hurricane Katrina, or bird flu...the list is endless. The question therefore is: does a person want his, or his family’s assets, as well as his business and the rest of his life, to be subject to these potentially massive fluctuations?

Maybe you believe there is no choice. You cannot diversify your assets as well as capitalise on the opportunities of Oman today.

For some this is true. And, so long as they are aware of the risks, have no problem whatsoever taking these risks in order to reap long-term gains, this strategy can be the right one for them. For other Omanis I meet, however, this is not the case.

Once they understand the benefits of diversification, I find that many clients want to structure a portfolio by segmenting it. A proportion could be in cash – an ‘emergency fund’ of sorts.

A proportion might be in owning a home – this is on its way in Oman. A further proportion might be in local investments – your business, IPOs, real estate developments – all of which you expect to produce spectacular growth.

But an equally important proportion, I usually advise, should be, if possible, in a safe haven, maybe outside the region. It should be invested through someone you can trust, held by an institution with top credit ratings, and managed with the expectation of capital security over the longer term. If this is a need you accept, despite all the other urgent pressures on your life which take precedence over your finances, I would encourage you to pursue it.

Despite the digital age as well as the de-personalisation of the money world, this is available. Many people sleep better knowing that a core part of their assets is really safe and secure – whatever happens around where they choose to live and spend their lives.

The author is a fully qualified international financial planner, practising since 1984. He is an independent agent of a private Swiss asset management company which manages many of his clients’ assets. Emails welcome to pportal@attglobal.net