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Dubai: The Gulf's asset managers may have been scratching their heads over the sideways movements of regional markets over the past few months, but they still managed to launch 37 new regional funds and looked to raise at least a billion dollars in the first half of the year, according to Zawya's Fund Monitor.
We estimate that the regional mutual funds industry had launched 55 regional mutual funds last year, with 24 funds launched in the first half of 2007.
The fresh crop of funds this year has come from a multitude of new players. Jordanian and Lebanese fund managers have joined the party, apart from the usual Saudi, UAE and Kuwaiti asset managers, as the funds industry looks to build on its gains.
Fourteen, or nearly 40 per cent of the funds launched this year, were focussed on the wider Mena region, while 17 were focussed on equity as an asset class, revealing that fund managers continue to spread their risks across the shallow regional stock markets.
Some of the 'bolder' managers have launched new country-wide funds. Global Investment House, for example launched the Global Egypt Fund and the Al Sanabil Fund focussed on Qatar.
Country funds
"Our strategy is to launch a country fund for each of the Middle East countries and allow our clients to access these markets as part of our product range," says Shahid Hameed, head of asset management, GCC, who launched the two funds.
According to Standard & Poor's (S&P), a number of regional managers are looking to cut their allocation to Egypt in the wake of the recent volatility in the stock market. However, Cairo-based Dalia Shafik, who runs the EFG Hermes Egypt Fund, remains optimistic, says S&P. Shafik has recently focussed on fertiliser, oil and real estate companies, believing that a real estate boom lies ahead in Egypt.
She notes that Egypt's GDP growth of seven per cent is one of the highest in the region and says valuations are reasonable with an average PE ratio of 11.
Hameed notes that Global is not in the business of timing the market. "It is never a good time to launch a fund, it is always a good time to launch a fund!" he says, arguing it that asset managers are always grappling with the dilemma of when to launch a fund - in bear markets or bullish ones.
Islamic finance
The Kuwait-based investment house is looking to launch country funds for Saudi Arabia, even though Hameed expects the Tadawul to remain between the 8,000-10,000 range. The bank is also looking to launch UAE and Oman country funds before the end of this year.
Interestingly, two of the funds launched in the first half of the year focussed on sukuk, as Islamic finance continues to raise its profile as a viable investment vehicle.
Gulf firms have raised $6.12 billion (or 61 per cent) in 22 issues in the first half of the year, and the two new sukuk funds are a reflection of the rising volumes in the secondary sukuk market.
In addition to keeping an eye on the regional markets, the Gulf's asset managers also launched another 20 funds focussed on the rest of the world as well, compared to 14 launched in the first half of 2007.
Jadwa's Africa Equity Freestyle Fund, Ithmar's Latin America Real Estate Fund and Shamil Bank's Central and Eastern European Real Estate Fund are some of the more exotic investment instruments on offer, reflecting the growing risk appetite and reach of regional investors.
- The writer is managing editor, Zawya.com.
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