Arqaam Capital’s asset management business is focused on frontier and emerging markets, and having started with MENA-based asset classes, the investment bank is now preparing to launch two new funds with underlying assets in Africa and equities in the GCC.
Dr Ameen Al Kholy, MD for asset management at Arqaam, told Gulf News that the Africa fund with have direct growth linkages to South Africa, Sub-Saharan Africa and North Africa.
Kholy noted: “With cross-border businesses booming in Africa, many North African companies have strong share of the growth story in Sub-Saharan Africa.”
“We are looking at capturing these growth linkages, and, of course, we will also look at direct exposure opportunities in key African markets such as Kenya and Nigeria.”
Arqaam is also in the process of closing a new GCC equity fund with stock picked for the fund on the basis of consistency in dividend payments and dividend growth, and focusing on companies that have completed their investment cycles and brought down leverage.
The Top GCC 200 companies by market cap have a median dividend yield close to five per cent, and Al Kholy notes: “We see an opportunity in these companies. With the interest rates where they are now, even as you see them rise in future, there is clearly a mismatch.”
“One of two outcomes will benefit investors: either they stay invested in these stocks and get high dividends; or, stock prices would eventually appreciate making a capital gain, but either way it is an opportunity.”
Arqaam funds have a history of beating market benchmarks, and its risk-managed Alpha Fund is up 24% since its launch in 2010 according to the figures from Zawya and Bloomberg, beating regional indices such as the S&P Pan Arab Index, MSCI Frontier Market Index and MSCI Emerging Market Index, up 13.5%, 12.3% and 8.5%, respectively.
Arqaam’s Value Fund is a long-only fund that has risen by 40.8% since its mid-2011 launch, compared to 5.2% growth in the S&P Arabia index, a -0.6% decline in the MSCI Frontier Market Index and a -14% decline in the MSCI Emerging Market Index.
Al Kholy added: “Typically we take positions in 20 to 25 stocks purely on value and growth potential and sell these when we see they have reached close to their fair value.”
“The key to our stock picking strategy is research, and a risk-managed approach that is not managed with respect to any index, but seeks absolute positive returns.”
In 2012, the Abu Dhabi investment fund Invest AD also launched a Middle East and Africa Bond fund in Luxembourg, and moved its GCC Focus and Emerging Africa Equities to the same platform.
Mohammed Al Hashemi, head of asset management, noted in May: “Invest AD is acting early. Ucits funds are increasingly desirable around the world, and very few Middle East and Africa asset managers offer them, while investor interest in these markets is growing.”
The Luxembourg financial regulator is stringent in assessing asset managers and fund structures, entailing some additional cost, but he described this as “a trade-off for the additional comfort that investors have in the quality of regulatory oversight.”