Dubai: Hedge Fund investing is gaining momentum in the UAE and the Middle East region, thanks to the growing sophistication level among high networth investors in the region and the global regulatory standards in the Dubai International Financial Centre (DIFC).
“Historically, the hedge fund industry has developed in clusters like the Grand Connecticut, Barclays Square are of London, Luxembourg, Singapore and some in Hong Kong. They are yet to cluster here. There are several reasons one of the reasons is the relatively low level of understanding of industry in this part of the world. But the market is changing,” said Howard Leedham, CEO of Dalma Capital, one of the pioneers of hedge fund management in the UAE.
Dalma Capital Management Limited is an Asset (Hedge Fund) Manager that is based in the DIFC Centre and regulated by the Dubai Financial Services Authority (DFSA). It currently manages the Dalma Unified Return Fund, domiciled in Malat, open only to institutional and qualified high net worth investors.
The mid-sized fund opened in July this year has already attracted a number of local regional and international investors.
Globally there is about $2.5 trillion (Dh9.2 trillion) worth of assets invested in the hedge funds and a significant portion of this comes from investors ranging from pensions funds, insurance companies banks, sovereign wealth funds, family offices and high networth individuals.
Historically some of the sophisticated regional institutions have been hedge fund investors. But the trend is seen catching up with a wider audience. “I do believe that the growth in investments into hedge funds is increasing significantly from the region. Some of the leading sovereign wealth funds from the region are major hedge fund investors. Preqin data base shows that about $104 billion from the region is invested in hedge funds,” said Leedham.
There are a lot of misconceptions about the hedge fund industry including the expectation that hedge funds should generate absolute return in all market conditions. Leedham does not believe that a hedge fund can actually outperform a market when it is under a bull run. But says these funds should give protection when the markets are heading south.
While the whole concept of hedge fund investing is based on mitigation of risks some of the past losses have given a bad name for the industry and the overall risk perception.
“The very term hedge fund gets its name from hedging one’s bets. So from that concept one can even look at the hedge funds say that if a hedge fund fails that it was not a hedge fund. If a hedge fund does not hedge its bets, by definition, it is not a hedge fund rather it is an investment fund,” said Leedham.
Dalma Unified Return Fund bases its strategy on investing in global developed markets, mostly blue chip equities, some indexes and some securities directly and we keep our portfolios as diversified as possible across the globe.
“What we offer our clients is strategies to diversify their investments to mitigate risk. Within in the industry there are various strategies to achieve diversification and ours is just one of them” he said.
While Dalma offers monthly liquidity on its funds, nearly 90 per cent of the portfolio consist of listed securities such as shares and ETFs.
