Investments | Prestovia Trust

[3-min read] Trust Fund Basics in the UAE: What Are Trusts and How Do They Work

Prestovia Trust — Tue, 07 Mar 2023 04:00:00 +0000

What are Trusts?

Put simply, trusts are legal arrangements in which one party, known as the trustee, holds assets on behalf of another party, known as the beneficiary. It is a relationship between three entities; the settlor, the trustee and the beneficiary – it is not a person like an individual or a corporation. At the outset, the settlor will contribute assets to the Trust, which are in turn managed by the trustee. While the trustee holds legal title to the assets and controls how they are managed and distributed. The beneficiary is the ultimate owner of the trust assets. There may be multiple trustees and numerous beneficiaries – or even classes of beneficiaries yet to be born.

Trusts are often used for a variety of purposes, including estate planning, asset protection, and charitable giving. In the United Arab Emirates (UAE), trusts are governed by the UAE Civil Code, which sets out the legal framework for the creation, management, and dissolution of trusts.

Types of Trusts

In the UAE, there are two types of trusts: express trusts and constructive trusts. Express trusts are created by a written instrument, such as a trust deed, which sets out the terms and the rights of the trustee and beneficiary. Constructive trusts, on the other hand, are created by operation of law, without the need for a written instrument. These can be created when someone holds assets on behalf of another person, but without a formal trust agreement in place.

The UAE Civil Code also recognizes a specific type of trust called a “waqf” which is a charitable trust, commonly used for religious or educational purposes. A waqf is created by the settlor (the person who creates the trust) who donates assets to it and the trustee holds the assets and uses them for the benefit of the beneficiaries (the charity or the cause).

Laws around Trusts in the UAE

Trusts can be created for a wide range of purposes, including estate planning, asset protection, and charitable giving. In the UAE, trusts are governed by the UAE Civil Code, which sets out the legal framework for the creation, management, and dissolution of trusts. Trusts can be created for a wide range of purposes, including estate planning, asset protection, and charitable giving. However, it is important to note that it is not recognized in all countries and that the laws governing it can vary significantly from one jurisdiction to another. Therefore, it is important to consult with a qualified legal professional when setting it up, to ensure that it will be valid and enforceable in the jurisdiction where it is located.

The taxation of trusts is not straightforward

Most jurisdictions treat Trusts as persons for tax purposes and require the trustee to file a separate tax return for it, distinct from your own tax return. In the UAE, Trusts are not subject to income tax. However, in order for a Trust to be resident in the UAE, careful attention needs to be paid to the constituent members of the Trust.

Why Use a Trust for Wealth Management?

A trust can be a useful wealth management tool to help with succession planning and intergenerational wealth transfer. When structured correctly, they can also be extremely tax efficient, particularly with cross border estates and multiple asset classes whilst also ensuring your wishes are carried out after you have passed away.

A trust can also help to manage assets, investments, residences and businesses through a centralised structure. When correctly set up, trustees will ensure that the aims and objectives of the trust are carried out throughout it’s lifetime.

When identifying the most appropriate structures to protect and enhance your wealth and assets it is essential that you obtain the best legal and tax advice available; ensuring the most effective and efficient outcome for the generations to come.

If you would like to find out more about how a trust may be beneficial with your wealth management please contact Prestovia Trust.

We are well placed to discuss your personal situation and provide guidance in formulating the best and most advantageous succession plan for you.

[3-min read] Are Cybersecurity Investments Right for Your Portfolio?

Prestovia Trust — Mon, 20 Feb 2023 08:00:00 +0000

Are Cybersecurity Investments Right for Your Portfolio?

The tech sector has been seeing a lot of volatility, but there is still one category within it that is going strong, and with good reason.

A slew of major cyberattacks over the past years, and the increasing threat it poses across industries and geographies have spotlighted the need for cybersecurity. Studies show that cybersecurity is and will continue to be a top priority for businesses across sectors in 2023, bolstering the strength and long-term outlook of the industry.

Cybersecurity is the application of technologies, processes, and controls to protect against the unauthorised exploitation of systems, networks, programs, devices and data, and reduce the risk of cyber attacks.

It is an important consideration for a number of reasons, including:

(1) The increasing cost of cybersecurity

(2) Increasingly sophisticated cyberattacks

(3) Its significance as a critical board-level business issue; and

(4) Cybercrime becoming big business, with a recent report stating that the world economy loses over 1 trillion dollars a year due to cyber attacks.

The need of the hour

Digital transformation, migration to the cloud, a move towards open access software, remote working and the application of AI into key industries have all been massive shifts that governments, businesses and individuals have been making in just a few years.

This rapid growth of tech in our daily lives has left it open to vulnerabilities, and cybersecurity has to match this pace of growth.

Scaling tech directly influences the scale of the risk it faces. As we digitize everything from oil lines and defence infrastructure to medical data and business information, security plays an increasingly important role in protecting our key interests and even geopolitical security.

Investing in cybersecurity

Some analysts say that leading cybersecurity vendors could see their revenues rise rapidly but also sustainably, given the expected long-term demand for cybersecurity services. The natural consequence of the growing complexity of cyberthreats and hackers’ capabilities is the increasing demand for and value of the security sector.

Cybersecurity could be a good addition to long-term portfolio holdings, and research has shown that it is geared to be the fastest-growing category compared to others in the software space.

However, investments into specific providers need to be considered carefully. Not all companies are doing well, and there are a number of mergers and acquisitions that have weakened rather than strengthened companies’ balance sheets.

Cybersecurity investments worth considering

Some factors you need to consider when investing in cybersecurity equity are governance, including the company’s risk management, the nature of its products, the data available and their projections. It’s worth spending some time familiarising yourself with the industry itself to gauge the value and potential of your choice of investments.

Vendors in sectors such as endpoint security and network security could be good additions to a balanced portfolio as these are services that cater to a wide range of users, from governments and global corporations to individual home users.

In our unpredictable geopolitical climate, defence and aerospace cybersecurity providers could also be lucrative opportunities to diversify your portfolio.

A thematic ETF is also a great option since its varied options could lend your capital stability, as well as help you stay on top of market trends.

The 2022 Q3 earnings season, along with market forecasts show that the demand for cybersecurity services is not likely to slow down anytime soon. Many sector leaders are likely to continue hitting high long-term revenue growth targets amid surging demands.

Talk to one of our experts at Prestovia Trust to discuss whether cybersecurity is a smart investment opportunity for you to diversify your portfolio and take advantage of compounding gains in the long term.

[3-min read] What is Multi-Asset Investing?

Prestovia Trust — Wed, 30 Nov 2022 10:07:01 +0000

Multi-Asset Investing

While the goal for any astute investor is to leverage their hard-earned income into wealth-building opportunities, another aspect many take for granted is “simply” protecting that earned income.

Historically, as we have experienced before (more recently over the past few years), particular market conditions can wipe out years and sometimes even decades of gains accumulated by our investments.

In 2020, hundreds of millions globally saw their portfolio values decline dramatically due to the “black swan event” (an unforeseen, unexpected event with significant economic and financial effects). It was common to see investors report 50%+ losses in that occurrence.

So does this mean that we should all avoid the markets altogether?

We don’t believe so because, in our opinion, investing is the true form of “working smart, not hard.”

However, to us, maintaining a balanced portfolio through multi-asset investing could possibly be the solution.

What is Multi-Asset Investing?

Multi-asset investing simply means diversifying your capital across various asset classes. An asset class is a sector or industry to which an investment relates.

For instance, stocks in specific companies are one asset class, while real estate is an asset class by itself, and precious metals such as gold and silver are grouped in their own as well.

There are many more asset classes like farmland, bonds, cash, and in some instances, insurance policies. All of these classes, other than stocks, are known as “alternative investments.”

They gained the name “alternative investments” because stocks are considered the primary investment, and anything secondary to them is an alternative.

Why is it so Popular?

Multi-asset investing has become popular over time, thanks to many reasons.

For one, it allows investors to venture into other opportunities that may fit their personality, likes, or personal interests more than just stocks.

Different asset classes also offer their own unique benefits. For example, there are specific tax deduction benefits one can take advantage of by investing in commercial real estate that is not provided in other asset classes.

The same applies to certain life insurance policies where the owner can treat it as their own personal bank and take out loans against it. In this instance, the policy’s owner is both the provider and borrower of the loan.

Finally, and what may be the primary reason investors flock to multi-asset investing is the balance it provides.

Shelter From the Storm

While no asset class is free from volatility (especially during black swan events), there are some asset classes, however, that are not affected during such times as bad as others are.

Precious metals, for example, have always been considered to be a “hedge” against high inflation, which usually occurs during times of economic turmoil. Hedge meaning protecting or moving against.

In scenarios when inflation is running rampant, it’s common to see stocks underperforming while gold and silver are beating the market (outperforming the stock market in gains.)

Commercial real estate is also an asset class that tends to perform well regardless of economic conditions but can be exceptionally comforting during market downturns due to its passive yet consistent income distribution, which generally occurs monthly.

In short, if you are strategically diversified, then when one asset class underperforms, in theory, the others should help stabilize your portfolio.

Challenges

The concept of Multi-asset investing sounds promising, and indeed it is; unfortunately, not many can capitalize on the full benefits of this strategy as it takes time, experience, and expertise across various sectors, which, unless you are a dedicated professional, is not feasible for most.

In our opinion, balance is excellent, but it can be hard to achieve for most – but not to worry, because that’s why we’re here.

Get in touch with Prestovia Trust to discuss if this would be a good opportunity for us to help you diversify your portfolio.

[3-min read] ESG Investing – Road to Responsible Investing

Prestovia Trust — Fri, 25 Nov 2022 06:38:01 +0000

What is ESG Investing?

Environmental, social, and governance (ESG) investing represents a way of sustainable investing that takes into consideration ESG factors. ESG investing is based on the idea that environmental and social factors are leaving a stronger impact on the financial performance of corporations and organizations.

This method of investing adheres to environmental criteria which gives importance to how a company protects the environment and corporate policies focused on climate change and human well-being. ESG investing also considers strict social criteria which analyse the relationships between the company and its staff, customers, suppliers, and so on.

Finally, it also follows governance criteria that address a company’s executive pay, audits, leadership, and shareholder rights, among others.

How does ESG investing work?

As ever, investors allocate their funds to assets with the highest-return potential. Given the growing importance of ESG factors in recent years, global brokers and mutual funds have started launching exchange-traded funds (ETFs) and other financial tools that adhere to ESG investing criteria.

ESG-based ETFs and mutual funds hit a new high of $400 billion in assets under management (AUM) in 2021, marking a 33% year-over-year growth. This trend is expected to continue gaining traction in the future. Furthermore, industry reports showed that investors held $17.1 trillion in ESG-related assets in 2022, up from $12 trillion in 2018.

The coronavirus pandemic played a major role in stimulating this trend as market turmoil drove numerous investors toward ESG-specific funds to provide more portfolio stability. In the first three months of 2022, ESG-specific funds saw inflows of $45.6 billion.

Incorporating ESG into your Portfolio

Incorporating ESG considerations into investment strategies is rapidly becoming a must for accessing capital. While investors continue showing more interest in ESG investing, many face issues related to how to actually incorporate ESG into their portfolios. Below are two key factors to consider.

Primarily, investors must specify their ESG beliefs and then decide how much ESG they wish to incorporate.

One of the key steps to consider when incorporating ESG is active ownership. This method, which can be implemented via proxy voting or company engagement, has proven to be an efficient way to mitigate ESG-specific risks while maximising return potential and maintaining a positive social and environmental influence.

Secondly, it is essential for investors to ensure they hire fund managers that can properly incorporate ESG factors into their portfolios. For this reason, it is important that their investment consultant thoroughly understands the importance of ESG factors and knows how to evaluate investors’ ESG capabilities.

Big money managers have been adopting ESG investment principles quite slowly over the past decade, but that trend has been picking up steam much faster in the more recent period. Rising concerns over immediate threats looming over global economies and the planet, such as climate change, have brought asset managers to a turning point.

That said, asset managers around the world are now facing a difficult challenge that involves developing a sustainable business model around the new age of ESG-specific investments.

Future of ESG investments?

It is clear that ESG investing will keep gaining traction in the future as investors continue to show an appetite for sustainable investment funds. There are several factors driving this trend, making it highly unlikely that ESG investing is a short-term movement.

Both individual investors and the largest money managers are increasingly shifting portions of their portfolios toward ESG-specific investments as they seek ways to use their money to help build a more sustainable world.

While ESG investing dipped in 2022 due to a tough environment, it is widely expected that investors should return to ESG investing as the market recovers and the global investor sentiment improves.

Talk to one of our experts at Prestovia Trust to discuss whether ESG Investments is a smart investment opportunity for you to diversify your portfolio and take advantage of compounding gains in the long term.