Dubai: The creation of pension funds and the widening of capital markets in the Middle East and North Africa (Mena) are essential steps in making the region more attractive to international fund managers, a process that may take at least five years, a senior executive at Baring Asset Management said on Thursday.
In the wake of the geopolitical turmoil in the region, countries such as Saudi Arabia and Qatar have pledged to pour billions into infrastructure projects. In addition, the region has large populations and possesses the natural resources to make it a potentially attractive investment story to long-term investors.
“It’s (investing in the Mena region) an exciting story but a slow burner and it takes a long time,” said Marino Valensise, chief investment officer at Baring Asset Management.
“It’s not going to be a straight line. The absolute priority for governments is to have more a balanced society and to put more money into the hands of families. We need a better operating and a deeper funding market for all these (infrastructure) projects. Yes, governments will put money in it but private enterprises need to play a role,” he said, adding the creation of pension funds and retirement schemes are key to the region’s financial development.
Baring Asset Management has one dedicated Mena fund started in 2010, the size of which is around $10 million. The fund manager has one representative office in Dubai.
Its investment in the region revolves mainly around equities. Regional stock markets have rallied since the start of this year, as economic activity rebounded and Dubai managed to finalize some large debt restructurings. In addition, the average combined daily turnover of all stockmarkets in the Gulf region has almost doubled compared to last year.
“This is a strategic investment in a part of the world which has got all the necessary ingredients to make it a success but one has to be patient from an investment point of view,” Valensise said, adding selling equities from the region to overseas investors is difficult because of the global economic malaise and the geopolitical upheaval although appetite for regional investments was slowly returning.
Barings provides investment management services, with emerging equity and bond markets focus, to investors worldwide, and has around $50 billion of total assets under management.