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Strong demand for Mideast investment funds
Franklin Resources will work hard to build a global solution for Sharia-compliant market.
- By Gaurav Ghose, Financial Features Editor
- Published: 00:08 July 2, 2008
Dubai: Demand for investment funds specific to the Middle East from the institutions in the US, South Korea and Japan is rising, according to a top official of an investment management company.
Gregory E. Johnson, Franklin Resources Inc's president and chief executive officer, whose company last year bought a 25 per cent stake in Dubai-based Algebra Capital - a regional asset management firm, said: "A year or two ago it was the Bric [Brazil, Russia, India and China] countries that everybody was interested in. Now there is a lot of interest in Mena exposure and there is a very limited way to get that in those markets. So we can truly see the advantage of having this [relationship] up and running a year ago versus trying to do it today."
Retail
In the region, there are more than 1,500 stocks with a market capitalisation of $1.4 trillion and a daily trading volume worth $5-$7 billion.
"And [even if] stocks are stuck, they can be attractive because of relative valuation. So the money will get there eventually when you have undervalued securities. We are hearing from experts that on a relative basis they are very attractive and so eventually it all equalises. Liquidity and transparency in a market are always risks and even more in a nascent market and that again, will take time if they develop and we have just to be cautious."
A combination of high liquidity, the economy doing well, long term behaviour shown from the investing expatriates, regulatory reform and expanding distribution has led to the expansion of the retail market.
Though the company hasn't yet come up with Sharia-compliant solutions, the president and CEO of Franklin Resources said that it is going to put a lot of efforts toward trying to build a global solution to address that.
"We think that there is a huge, huge opportunity for a firm that gets it right and I think because of the opportunity and size, it's something we will attempt to do," Johnson said.
Finally, on whether Franklin Templeton Investments has plans to raise its stake in Algebra Capital, Johnson believes that it depends on how the partners work it out between themselves.
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