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Dubai: The year 2007 was far from perfect for regional bourses with many fund managers taking it on the chin as volatility hit them repeatedly. But the last few months swept away much of the loss and all the funds in the Zawya Mutual Funds Monitor were back in the black by the end of the year.
But some fund managers shone more than others.
Four of HSBC Saudi Arabia's funds were among the ten best performing funds in 2007.
The bank's Amanah GCC Equity Fund did nearly twice as well as its benchmark, with returns of 83.57 per cent, compared to the Shuaa GCC benchmark of 43.41 per cent.
HSBC Saudi Arabia fund managers also took second spot with Amanah Saudi Industrial Companies Fund, which did extremely well on the back of high energy prices, netting a return of 81.23 per cent, although it was only marginally better than its Saudi industrial benchmark.
"It was primarily due to our allocations, which were driven by our research; and we were overweight on some key companies like Sabic, which helped us outperform the market," Saqib Masood, head of product development at Saudi HSBC, said.
"Last year, there was a lot less volatility in the market, but the markets were down. It was the last quarter of the year which boosted the funds in terms of absolute performance."
Samba Financial Group's Al Fareed Fund posted returns of 71.71 per cent, comprehensively beating its benchmark Tadawul All Shares Index (TASI) Fund by a good 30 per cent.
In fact, funds launched by Saudi banks grabbed the first five spots in the region, with SABB Saudi Equity Trading Fund earning a staggering 66.5 per cent returns, while Al Rajhi's GCC Equity Fund came in fifth with 64.36 per cent.
The performance of Saudi-focused funds is impressive given that the Tadawul had performed poorly for most of the year.
The recovery was initiated over the second half of the year, as the TASI benchmark index touched its lowest point since October 2004 as recently as June 2007.
"From that point the market rallied by a massive 63 per cent over a period of only six months," Shuaa noted. In the UAE, National Bank of Abu Dhabi (NBAD) fund managers had reason to smile as the NBAD UAE Growth Fund featured in the ten top regional performers list. The fund was the region's sixth best performer, rising nearly 63 per cent, and emerging as the best performing funds focused on the UAE markets.
"We changed the complexion of our portfolio last year," said Derek Hong, senior fund manager for the Mena and GCC products at NBAD.
"We picked up on inflation as a trend and we focused on real estate, energy and manufacturing companies that were inflation-beneficiaries such as Orascom Construction, Sabic and Industries Qatar.
"We also realised there was huge potential in infrastructure. We played those and we tried to keep our turnover down - these are long-term secular trends and you do have hiccups, but when global investors are looking for growth, Mena is the only region that is showing actual growth."
The growth story is set to continue and will be reflected in the funds' performance this year as well, especially as international investors continue to take equity positions here in the region in the backdrop of falling returns elsewhere.
And volatility means it will take all the maneuvering of experienced fund managers to navigate through the choppy regional markets.
- The writer is managing editor of Zawya.com.
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