More region-focused funds out in market

Forty-three region focused funds were launched by financial institutions in the first half of 2009, compared to 39 in the first half of 2008.

These range from notorious hedge funds to plain vanilla fixed-income and money market funds. Equally important, regional asset managers launched 19 equity funds in each of the periods, dispelling the myth that appetite for equities has diminished since last year.

At one end of the spectrum is the giant Invest AD, formerly known as Abu Dhabi Investment Company (Adic), which has looked increasingly aggressive in the regional market, adding three equity funds focused on UAE, GCC and wider Middle East and North Africa (Mena) region earlier this year.

At the other end is the Mena Opportunities Fund - a hedge fund launched by the Duet Group.

"Hedge funds come in various shapes, and ours is a conservative fund focused on taking advantage of mispricing and arbitrage opportunities," says Rabih Sultani, the company's chief investment officer. "The fund has $30 million [Dh110 million] in assets of which 40 per cent is client money; commitments from prospective clients can bump it up to $50 million by the end of the third quarter."

Even though the fund is largely taken up by international hedge fund managers, Sultani says there is one regional client and "others are interested," as regional investors slowly warm up to the idea of placing their investments in the tricky world of hedge funds.

Rasmala Investments also dipped its toes in the Saudi market earlier this year with the launch of two Saudi equity focused funds - one conventional, one Islamic - in the throes of what were truly volatile market conditions.

"Obviously some wanted us to wait a few weeks or months," says Mohammad Shabbir, head of asset management at Rasmala Investments Saudi.

"But when you have a product in hand and have money to invest, it is your call, and you can choose to make one large bet or a series of small bets - obviously, everyone wants to place one large bet and hope the market would rebound.

"The way we looked at it was to make many small calls, instead of making one big call on the market - and we launched the fund with 20-25 small calls. It was a tactical move, as we always believed in the fundamentals of the economy. The fund has outperformed the Tasi (Tadawul All Share Index)."

But are the asset managers' new funds attracting significant interest from investors, many of whom are reportedly sitting on the sidelines?

"Invest AD has attracted over $100 million to its newly launched UAE Equities Fund from institutional investors, reflecting rising interest in Middle East and North Africa markets," says Invest AD Chief Executive Officer Nazem Fawwaz Al Kudsi.

Rasmala's Shabbir also notes that the size of its conventional Rasmala Saudi Equity Fund is under $10 million.

"Not huge, but we now have better insight of investor sentiment. We believe sentiment is improving, but investors are still reluctant to commit to an idea or theme and are in protective mode. They want to see guaranteed returns. But in general we believe the majority of investors are not the type who would hold to fixed-income theme for long and think that many investors will return to equities there is a lot of money that needs to be parked."

Sharia-compliant funds also seem to be in the ascendancy and garnering more interest, with 18 of the 43 funds launched in the first half of the year being Sharia-compliant.

Indeed, Shabbir thinks that Rasmala's Islamic fund will attract more investors than the conventional one and is aiming to raise $40-$50 million in six to 12 months.

- The writer is managing editor of Zawya.com