In a strategic move, fund manager Rajiv Jain, founder of Florida-based asset manager GQG, steered his investment focus towards the Middle East, amassing a substantial $2.8 billion holding in the region's companies.
This move, unfolding over the past 18 months, comes as a response to Middle East governments' Investment-friendly approaches and ambitious plans to diversify away from oil dependence. GQG's substantial reallocation of funds from China to the Middle East signifies a major shift in the firm's portfolio strategy, reflecting Jain's confidence in the region's prospects.
GQG manages a staggering $105 billion in assets and renowned for its innovative investment approach. Jain's investments in the Middle East include a $1 billion stake in International Holding Company (IHC), a conglomerate listed in the UAE with a market value of $243.6 billion.
Jain views IHC as a strategic means of gaining exposure to the robust growth prevalent in the region. The move underlines GQG's commitment to making well-calculated contrarian bets and showcases the fund's foresight.
Shift in portfolio
The current allocation of GQG's funds indicates a marked shift from China to the Middle East, a decision that contrasts sharply with the firm's position five years ago. In 2017, China represented 40 per cent of the firm's emerging markets portfolio.
GQG's recent focus on the Middle East signifies a notable shift, with the funds now holding a larger investment in the region compared to China. The GQG Partner Emerging Markets Equity Index now comprises 82 holdings, with Saudi Arabia and the UAE jointly representing 2.31 per cent of the index, amounting to a significant $316.36 million.
The UAE's non-oil economy has been expanding at an impressive rate of around 3.5 per cent over the past year. This is attributed to robust domestic activity, driven by social and Investment-friendly reforms.
The non-hydrocarbon GDP is projected to exceed 4 per cent in 2023 and maintain a similar pace in 2024. Attracting foreign inflows of capital and labor, the UAE's safe haven status has contributed to elevated real estate prices, particularly in high-end segments.
The UAE's non-oil foreign trade has reached unprecedented levels, registering a double-digit growth of 14.4 per cent in the first-half of 2023. Thisis attributed to new partnership agreements aimed at doubling the size of the national economy by 2030.
Saudi Arabia’s prospects
Saudi Arabia, too, is witnessing a significant economic shift as its non-oil sector is projected to expand between 3-4 per cent annually until 2030. The non-oil sector to Saudi Arabia's GDP, is projected it to constitute about 56 per cent by 2030.
Saudi Arabia's Vision 2030, a comprehensive economic diversification plan, is set to stimulate growth in vital sectors such as tourism and construction. The continued provision of credit facilities to SMEs, along with a focus on labor force expansion, is poised to sustain the momentum of the non-oil private sector.
The UAE and Saudi Arabia have become attractive hubs for fund managers seeking promising investment opportunities in the Middle East. The region has exhibited strong economic growth, with both countries diversifying away from hydrocarbons, leading to GDP projections exceeding 4 per cent in 2024.
Their robust capital markets, represented by exchanges like the DFM and TASI, offer diverse listings, and increasingly sophisticated regulatory frameworks attract significant foreign capital. The countries provide attractive investor incentives, including competitive tax regimes and free zones with zero corporate tax, encouraging foreign fund managers to establish a presence.
With a stable political environment and potential for further growth and diversification, the UAE and Saudi Arabia present compelling opportunities for fund managers seeking dynamic emerging markets.