Talk is the way forward for Iran and the P5+1



Some say talk is cheap. As negotiations between Iran and the P5 + 1 continue in Istanbul today, talk is of the utmost necessity.

The P5 + 1 - Germany and the UN's permanent Security Council members, China, France, Russia, Britain, and the US - have not given up hope that dialogue can resolve a standoff with Iran over its controversial nuclear programme. Saeed Jalili, Iran's top nuclear negotiator, has also said that there are areas of potential cooperation. "In Geneva we agreed that the talks [this week] will focus on cooperation based on common grounds, and common grounds may include a range of subjects," he told Le Figaro this month. Though, as has frequently been the case, the Iranian negotiator left room for interpretation of his remarks and his country's intentions.

Diplomats from the P5 + 1 nations, one of whom told The National that exchanges in Geneva last month were encouraging enough for both parties to be optimistic as they return to the table, have prized hope over their experience with Iran over the last several years. Iran's recent history of dialogue with the international community is replete with broken promises, but the desire of the P5 +1 to broker a deal - and trust in Iran to keep it - endures. Mechanisms to verify that Iran is keeping its promises are likely to be a sticking point of any negotiations.

Today's talks have a different background than those in previous years: sanctions are taking their toll on the Islamic Republic, particularly in its ability to procure the components and materials essential to its nuclear programme, though other sectors of the Iranian economy have felt the pinch as well. Malware and cyberstrikes also appear to have made their mark, slowing down operations at facilities that are alleged to be part of an Iranian nuclear programme. A complex computer virus, Stuxnet, is reported to have disrupted the operations of Iran's centrifuges. The supposed event was significant enough for the US secretary of state Hillary Clinton to assert that Iran's nuclear capacity had been delayed several years.

It would be naive to expect a major breakthrough in Turkey today but that Iran is once again at the table is cause for optimism. While many outstanding issues remain - including a suspended fuel swap brokered by Turkey and Brazil in 2009 - the atmosphere appears conducive for fruitful negotiations. It behooves all parties to keep talking.

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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