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AWARDS 2023
Asset Management
Top GCC Fund Selectors
"I'm a quote"
A celebration of excellence
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Congratulations to all the winners of our first Asset Management Awards 2023. Despite global economic downturn and geopolitical concerns, the asset management industry in the Middle East has grown. The industry continues to exhibit robust growth potential, driven by strong capital inflows, favourable oil prices, and substantial trade surpluses. Wealthy individuals are pouring into the region, with the UAE expected to have the most millionaires in the world this year. Moreover, the region is witnessing a flurry of IPOs raising a record amount in proceeds. While 2022 was among the worst years for the global asset management industry, 2023 has surely seen a turnaround in the performance. The regional industry is becoming more competitive due to increased offshore investing following favourable regulatory initiatives and more sophisticated products. As a mark of acknowledgement, our inaugural Asset Management Awards celebrate the outstanding achievements and work done by the asset management professionals and teams across the region. The industry voted unanimously to choose the winners and honour their contributions across categories, including sales and service, solutions, equity, bonds, and overall.
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Paromita Dey Deputy Editor, Citywire Middle East
Name Company
Headline
Categories
Citywire Middle East will have three aspects to the award methodology which will include: • Citywire’s renowned global rating and performance data based on fund RFS in GCC • Voting from the the top GCC fund selectors • Industry voting from GCC based fund buying community
We provide news, analysis and fund manager performance information for professional investors across the Middle East. Our events bring together key fund buyers from the region to meet with leading fund managers. Citywire had over 60 million views globally last year across all our channels. We have been doing awards for many years in many countries. Here are a few of the awards we do every year around the world. Switzerland - UK - Germany - Paris - Italy - Portugal - South Africa - Spain - Asia
Citywire Middle East’s Asset Management Awards for 2023, will identify the region’s best third-party providers of asset management products and services to private banks, IAMs/ EAMs and wealth managers in the GCC.
About the Asset Management Awards
Who is behind the Asset Management Awards?
Asset Management Awards Methodology
Methodology
Award categories
Awards around the world
Lord Abbett Man Group Neuberger Berman
Lord Abbett
Best Sales team
SERVICE
What is Lord Abbett's strategic focus areas for the region?
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We launched our MEA business just over two years ago in the DIFC and our core strategic focus has been to enhance our coverage and deepen relationships with MEA based asset owners across our entire capability set. We work closely with Sovereign entities, Pension funds, Endowments, Central banks, Insurance companies and Family offices by delivering custom and existing investment solutions. We also continue to build on our global distribution endorsements via Global Financial Institutions and Private Banks across the region through our offshore fund business.
People believe personal relationships are more important than technical knowledge, what are your thoughts?
Personally, I do not believe you can have one without the other. A good relationship is typically a by product of being able to deliver relationship alpha to clients through a blend of technical competence, soft skills and also leadership skills. Technical skills help to position you as a trusted adviser to clients, whereas soft skills help enhance your ability to communicate across topics effectively, maintain integrity, self awareness and display empathy. Leadership skills are becoming increasingly important as professionals need the ability to clearly articulate the firm's mission, vision and culture to clients.
Our client service philosophy is relatively simple, but it forms a key foundational pillar within the delivery of our wider relationship alpha. We focus on three pillars, responsiveness, customization and the quality of output. For example, we actively maintain IPS' of all our clients in the region and this allows us to deliver on the last two pillars effectively. The quality aspect of output is derived from our focus on customization as we understand that every client we work with is different and have varying investment objectives, policy benchmarks and risk constraints. We therefore focus on curating more customized and relevant output in regards to thought leadership, reporting and risk/performance metrics. In our view clients now desire more specific and relevant deliverables versus off the shelf output.
What is your client service philosophy and why do you believe it stands out in the region with clients?
What are the skill sets or qualities you believe make a successful asset management sales professional?
In my view the industry is continuing to evolve in regards to the skill sets and qualities required to make a successful AM sales professional. There is now a much bigger need for technical expertise in terms of investment knowledge, capital market proficiency and the ability to communicate investment strategies in detail to clients. I would say to be differentiated in the space, professionals now need to be adaptable and have the ability to blend soft skills with technical skills. Due to the complexity and increased integration of capital markets, individuals now more than ever need the ability to connect holistically across various disciplines and asset classes and have the technical ability to gather a deeper understanding of each clients specific IPS and wider investment objectives. This allows professionals to take a more holistic view of a clients investment program and move to a solution based mindset versus a focus on product. Overlaying this technical foundation with soft skills in my view is vital.
Unlocking Success in Asset Management Sales: Lord Abbett's Strategic Focus and Client-Centric Philosophy in the MEA Region
James Savastano, Senior Executive Officer of Lord Abbett’s MEA business discusses how his team maintain and generate client centric alpha.
James Savastano
Head of Middle East & Africa Lord Abbett
Lord Abbett Man Group AllianceBernstein
Best Overall Service
BlackRock Franklin Templeton Goldman Sachs
BlackRock
Global Firm
BEST BRAND
Mashreq Capital Jadwa Investcorp
Mashreq Capital
Regional Firm
Since 2006, Mashreq Capital has helped institutional investors, distribution channels, and high-net-worth individuals to enhance their long-term returns – whatever the weather. Its extensive list of awards is a testament to its ability to deliver sustainable growth and enhanced dividends through research-based portfolio optimization and the expertise of a team of managers with over 100 years of combined experience. Now, with global inflation, conflict in Europe, and significant economic uncertainty, a tactical approach to income generation and capital growth is as important as it has ever been to investors looking for long-term certainty in an uncertain world. By instilling a fiduciary culture of accountability and global standards of asset management, Mashreq Capital - a wholly owned subsidiary of Mashreq - has succeeded in delivering sustainable long-term returns ever since it was established in 2006. Throughout the global credit crisis of 2008, the COVID-19 pandemic, and today’s economic uncertainties, the Company has proven its ability to help its clients navigate crises through its MENA-focused tactical strategies on funds, fixed income, and equities.
A comprehensive international ecosystem
Much of its success comes from its establishment in the Dubai International Financial Centre, allowing it to utilize world-class investment management infrastructure and services. Furthermore, because it is regulated by the Dubai Financial Services Authority (DFSA), Mashreq Capital benefits from the robust protection of an English Common Law legal framework. Under such a comprehensive and globally respected regulatory system, Mashreq Capital has been able to build an ecosystem of conventional equity and debt products in the MENA region and emerging markets – alongside an Islamic fund that provides investors in the MENA region with exposure to Shari’ah-compliant fixed-income securities. To support a balanced exposure, Mashreq Capital has also developed a suite of conservative, balanced, and growth-packaged portfolios focusing on MENA markets. These cover a range of products including MENA Fixed Income fund, Shariah Compliant Sukuk Fund, MENA Equity Fund, Emerging Market Bond Fund, and discretionary portfolios for institutional investors customized to client’s investment guidelines and risk appetite. The comprehensive approach of Mashreq Capital has been consistently recognized by regional and global industry organizations.
Recognition and awards
The awards and accolades include being ranked in the Forbes top 30 biggest asset managers in the Middle East in 2021. In 2015, it took the MENA Fund Manager Award at the MENA Fund Manager Performance Awards for its Makaseb Income Fund for the ’Fixed Income Fund for Three-Year Performance’ category. It was also named ‘Shari’ah Compliant Fund of the Year’ for the Mashreq Al Islami Income Fund. Similar awards from the MENA Fund Manager Performance Awards have followed, in addition to recognition from the Thomson Reuters Lipper Fund Awards, which selected Mashreq Capital’s Makaseb Income Fund for the ’Best Fund Performance over Five Years’ category. Such awards reflect the strong performance of the Mashreq Capital funds, which have delivered consistent returns over many years. The Mashreq MENA Equity Fund, for example, delivers quarterly income generation and capital growth through investments made primarily in equities listed on the stock exchanges of MENA markets.
The underlying strategy has been run successfully for a discretionary mandate for nine years. This success rests upon the expertise of an exceptionally strong team of investment managers who recognize how and when to allocate funds to various industries and regional exchanges. Their expertise has delivered consistent quarterly and monthly payouts ranging between 4.5% and 7.2%. The Mashreq Capital team comprises an exceptional, award-winning, and handpicked selection of investment professionals who carry a wealth of experience from global names. The Management, Equity, and Fixed Income teams boast world-leading portfolio managers and analysts with decades of experience from organizations as diverse as HSBC, Société Générale, S&P, and Dresdner Bank. Their combined experience is pivotal in helping investors navigate volatility in a dramatically changed world and mitigate the challenges attached to traditional fund management strategies. Through intelligence, research, and a wealth of expertise, the teams at Mashreq Capital are delivering best-in-class solutions designed to help investors achieve long-term income, whatever the weather.
Handpicked excellence and expertise
Thanks to the capabilities of its multiple-award-winning investment team and intelligence-based approach to asset and wealth management, Mashreq Capital is helping MENA investors navigate historic challenges to secure long-term returns.
Navigating volatility and achieving long-term returns through Mashreq Capital’s tactical approach to fund and asset management
Blackrock (iShares) Vanguard JP Morgan
Blackrock (iShares)
Best Passives Provider
SOLUTIONS
Man Group KKR Blackstone
Man Group
Best Alternatives Provider
Mashreq Capital Emirates NBD Asset Management Arqaam Capital
Emirates NBD Asset Management
Best Islamic Solutions
Citywire ME Awards: Capital Group on its ESG philosophy
Sam Streatfeild, a managing director at Capital Group, explains the firms’ integrated approach to ESG and how they look to meet the demands of investors.
Investors have spoken – and they’ve chosen Capital Group as winner of this year’s Citywire Middle East Asset Management Awards in the ESG space. The firm achieved the highest mark on satisfaction with its ESG product offering based on range, quality of products and flexibility in accommodating client needs. The firm’s managing director of financial intermediaries and family offices in the UK, Channel Islands and DIFC, Sam Streatfeild, explains the asset manager’s winning philosophy and the investment process at the heart of its ESG approach.
Our mission at Capital Group is unwavering: to improve people’s lives through successful investing. Deep, fundamental research has always been at the heart of our investment approach, and we believe that considering material ESG issues as part of our research can help us understand long-term risks and opportunities for investors. Capital Group was founded in 1931 on the belief that a deep understanding of the organisations in which we seek to invest will result in better outcomes for investors. This belief is part of our DNA and continues to shape the structure and operation of our investment effort. The hallmark of that effort is engagement. We visit companies, build relationships with their management teams and develop investment perspectives focused on long-term outcomes. Our process rewards investment professionals for their long-term results.
How would you describe your approach to seeking superior long-term investment results in the ESG category for clients?
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups. FOR PROFESSIONAL INVESTORS ONLY Marketing communication The information provided in this communication is intended strictly for sophisticated institutions or Authorised Persons. The information provided in this communication, does not constitute and should not be construed as an offer of, invitation or proposal to make an offer for, recommendation to apply for or an opinion or guidance on a financial product, service and/or strategy. This communication relates to information and commentary which is not subject to any form of regulation or approval by a regulator in your jurisdiction. No regulator accepts responsibility for reviewing or verifying any information or commentary provided herein. Accordingly, no regulator has approved this communication or any other associated documents nor taken any steps to verify the information set out in this communication, and has no responsibility for it. Recipients of this communication should conduct their own due diligence on the information provided. Whilst great care has been taken to ensure that the information provided herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. You may only reproduce, circulate and use this communication (or any part of it) with the consent of Capital Group. By consuming this communication, you irrevocably confirm that you are a sophisticated institution or an Authorised Person. The information provided in this communication may contain statements that are not purely historical in nature but are “forward-looking statements”. These include, amongst other things, projections, forecasts or estimates of income. These forward-looking statements are based upon certain assumptions, some of which are described in other relevant documents or materials. If you do not understand the contents of this communication, you should consult an authorised financial adviser. © 2023 Capital Group. All rights reserved.
Sam Streatfeild
Managing Director Capital Group
Knowing how organisations interact with and impact their communities, customers, suppliers and employees is important in understanding their potential as investments. We’ve sought to invest in firms that we believe are well-positioned for the future and can sustainably grow their businesses because that should eventually be positively reflected in a company’s share price and growth trajectory. In addition to supporting our stewardship of investor assets, ESG principles are an organisational priority and guide our own operations and corporate citizenship. We manage our business for the long term, continually investing in our people, communities and environment.
What are you looking for in companies that you invest in?
Our research effort has always aimed to create a deep and nuanced understanding of companies and issuers. We integrate ESG into our investment approach, The Capital SystemTM, through three interrelated elements. First and foremost, we have grounded our ESG framework in the deep fundamental research that has always been the cornerstone of our investing approach. More than 200 of Capital’s investment analysts helped create over 30 sector-specific investment frameworks to help understand ESG risks and opportunities within each sector. Our investment professionals focus on ESG issues that can be material for specific sectors. For example, they look at privacy and data security for banks, human capital management for media and entertainment organisations, and greenhouse gas emissions for metals and mining companies. ESG integration helps refine and deepen our understanding of the companies in which we invest. As the second pillar, we then complement our in-house analysis with third-party ESG data, which can help round out our assessment of policies, practices and outlooks for our corporate and sovereign holdings. This external information has value but also limitations. Our investment decisions are built on detailed research and consider the long-term view − they are never based on monitoring results alone. Finally, engagement and proxy voting are essential to what we do as active managers. We have been building relationships with companies over decades and these firms recognise our serious commitment, depth of knowledge and keen desire to learn from these interactions. Our investment analysts and portfolio managers partner with our ESG team to engage with companies on ESG issues, to better understand how material ESG risks and opportunities are being managed.
Could you explain Capital Group’s three-pillar investment philosophy and how this translates to ESG?
Robust processes and thoughtful frameworks are crucial, but we know that clients want more than pledges and opaque internal processes. They want a clearly articulated ESG approach and a straightforward methodology. Building an in-house ESG capability supports these important objectives. We are committed to reporting on our ESG process to clients and disclose quarterly fund-level monitoring outcomes for our corporate and sovereign holdings − where data is available − to show which companies have been flagged for more in-depth review.
Could you tell us more about your firm’s commitment to transparency?
Capital Group is deeply committed to the integration of material ESG issues in our investment approach. It’s a firmwide effort that involves associates from nearly every part of our organisation. Since we hold Capital Group to the same high standards as the companies we invest in, we are backing up our commitment with significant investments in our capabilities. As we learn, we’ll continue to refine and innovate, just as we have done for more than 90 years in our business. There is much work ahead of us and we’re excited about the future. We believe that focusing on material ESG issues plays to our strength as responsible stewards of our clients’ assets.
What is next for Capital Group in the ESG category?
Best Solutions
ESG
Capital Group
Capital Group BlackRock Vanguard:
PIMCO Mashreq Capital Principal Global Investors
Principal Global Investors
Emerging Markets Global Hard Currency
Bonds
PIMCO Colchester Global Investors HSBC Global Asset Management
Colchester Global Investors
Emerging Markets Global Local Currency
Compelling prospective real yields, the potential for further declines in inflation, improved macroeconomic stability across much of the EM local currency debt space, and meaningful real currency undervaluation versus the US dollar, all provide a positive backdrop for the asset class going forward. Local currency EM debt is likely to prosper in this environment and may be expected to outperform its hard currency EM debt counterpart should the US dollar continue to fall. Against its own history, Colchester’s assessment of the potential real return on offer in the local currency debt space is particularly attractive at this juncture.
The Case for Local Currency Emerging Market Debt
Ian Sims
Chairman and Chief Investment Officer Colchester Global Investors
Keith Lloyd
Chief Executive Officer and Deputy CIO Colchester Global Investors
Cian O’Brien
Senior Investment Officer Colchester Global Investors
Colchester Global Investors is an independent investment management firm focused solely on sovereign bonds and currency management. Colchester was established in London by Ian Sims in 1999 and has since grown to USD 26bn in assets, with 84 employees in offices across London, New York, Dublin, Madrid, Dubai, Singapore and Sydney (as of 31 August 2023). The firm manages assets for a global client base that includes sovereign wealth funds, central banks, corporate and public pension funds, foundations, endowments, private banks, multi-managers, family offices and wealth managers.
About Colchester Investment Philosophy
Colchester is a value-oriented manager. At the heart of Colchester’s philosophy is the belief that investments should be valued in terms of the income they will generate in real terms. Our process seeks to exploit two pricing inefficiencies and, therefore, generate two separate sources of alpha. First, we look to capture the alpha inherent in the differences in real yield around the globe by building our portfolios with the highest real-yielding countries in our opportunity set. Historically, this strategy has generated significant alpha for the bond portfolio. We also look to capture the mean-reverting process inherent in currencies values over the intermediate term as they move towards their purchasing power parity valuation. Our valuation metrics for both bonds and currencies are adjusted for an assessment of the country’s balance sheet strength and financial stability. This assessment incorporates a wide-ranging analysis of fiscal and external accounts as well as economic stability, institutional strength and Environmental, Social and Governance (ESG) factors.
“After facing a number of headwinds in the recent past, we believe that the local markets EMD asset class is now well placed to benefit from a sustained upswing”
The Colchester Local Markets Bond Fund USD Unhedged Accumulation Class – I Shares (ISIN IE00BQZJ1775) has achieved a gross annualised excess return of 2.05% since inception on 15th March 2013 to the end of August 2023, with an information ratio of 0.83. It has outperformed the JP Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified USD Unhedged by 3.95% p.a. over 3 years and 2.49% p.a. over 5 years gross of fees to the end August 2023.
Performance Fund vs index performance
Colchester’s research suggests that the current value on offer in both the JP Morgan GBI-EM Global Diversified USD Unhedged Index and in the Colchester Local Markets Bond Fund USD Unhedged is close to historical highs. Attractive prospective real yields combined with the undervaluation of emerging market currencies versus the US dollar make a compelling valuation case relative to history. Many emerging market countries were quicker to increase interest rates and as such, they are starting their cutting cycle ahead of their developed market peers. With inflation reducing, this results in attractive real yields being available. Furthermore, emerging market governments have significantly lower debt to GDP than their developed market peers, which results in lower interest payments. We find attractive real yields on offer in LatAm, with the likes of Brazil, Columbia and Mexico all looking attractive. Elsewhere, we find exciting opportunities in the likes of Malaysia, South Africa and Indonesia. On the currency side, we see attractive valuations in the Brazilian real, Mexican peso, Colombian peso and Malaysian Ringgit. Compelling prospective real yields, the potential for further declines in inflation, improved macroeconomic stability across much of the EM local currency debt space, and meaningful real currency undervaluation versus the US dollar all provide a positive backdrop for the asset class going forward. History suggests local currency debt outperforms hard currency debt during periods of US dollar weakness. Against its own history, Colchester’s assessment of the potential real return on offer in the local currency debt space is particularly attractive at this juncture.
Where we see opportunities The outlook for Local Markets Emerging Market Debt
Past returns are not a prediction or guarantee of future returns and the value of any investment may fall as well as rise. This article should not be relied on as a recommendation or investment advice. Colchester Global Investors Limited is regulated by the UK Financial Conduct Authority and Colchester Global Investors Middle East Limited is regulated by the Dubai Financial Services Authority, and only deals with professional clients. https://www.colchesterglobal.com for more information and disclaimers.
Allianz Global Investors PIMCO Colchester Global Investors
PIMCO
Global
Goldman Sachs Asset Management Schroders La Française Systematic Asset Management
Goldman Sachs Asset Management
Global High Yield
Fidelity International AllianceBernstein PIMCO
AllianceBernstein
Dollar
US
J.P. Morgan Asset Management Fidelity International HSBC Global Asset Management
Fidelity International
Asia Pacific Excluding Japan
EQUITIES
BlackRock Schroders Credit Suisse Asset Management
Japan
Schroders BNP Paribas Asset Management HSBC Global Asset Management
Schroders
China
Aditya Birla Sun Life Asset Management Company UTI Goldman Sachs Asset Management
India
Schroders AllianceBernstein T. Rowe Price
T. Rowe Price
Not out of the woods yet: shoring up resilience while keeping an eye towards the future
Actively Investing in US Equities Since 1937 • Total Assets Under Management: US $1,399.4 Billion (1) • US Equity Assets Under Management: US $571.4 Billion (2) • 200+ US equity investment professionals worldwide • 163 US equity research professionals worldwide • Capabilities across styles and market cap • “We have been investing in US equities since the founding of our firm in 1937, and have thoughtfully evolved our capabilities over time to meet the needs of our clients. Today, we offer a range of solutions to suit different client objectives: from large to small cap, across value, core and growth strategies.”
T. Rowe Price US Equities Capabilities: Eight Decades Building the Framework
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Investors are contending with a very different environment than the relatively benign conditions that prevailed in the decade-plus after the global financial crisis. High interest rates, inflation, and uncertainty regarding the U.S. economy’s trajectory, have created a more cautious investing environment. However, the volatility that accompanies macroeconomic uncertainty can present opportunities for active managers. At these times, markets become even more focused on the short term. Investors are also prone to mistaking temporary headwinds, such as slowdowns stemming from pandemic-related dislocations, as longer lasting secular challenges.
Fundamental strengths matter more than ever
Much of last year’s weakness in growth stocks stemmed from valuations coming under pressure as the market reacted to the Fed raising interest rates at the fastest pace in more than four decades. The U.S. central bank’s target interest rate is likely nearer to the peak level for this cycle of monetary tightening, suggesting that earnings and free cash flow could reemerge as important drivers of a stock’s relative performance. Growth stocks generally include higher-quality businesses that may not exhibit as much sensitivity to broader economic conditions as their value counterparts. Still, selectivity is critical. Companies that can post resilient or robust growth are likely to stand out against an uncertain backdrop where consensus expectations suggest that earnings upside could be relatively scarce this year. The qualities that we prize in our search for sustained growth—from competitive positioning and margin profiles to capable management teams and exposure to what we view as compelling demand trends—matter more than ever when the outlook for the market and economy is unclear.
A robust labour market and resilient consumer spending have provided some cushion for the Fed and their attempt to achieve a soft landing. However, the lagged effect of rate hikes and stickier components of inflation open the door to potential monetary policy mistakes, which could still lead to an economic downturn. With this in mind, we’re striking a balance between offense and defense within the portfolio and focusing on idiosyncratic growth stories that should allow a company to compound independent of the macro backdrop. We believe this approach should leave us better positioned for a variety of different market conditions.
Striking a balance between offense and defense
Julian Cook
Portfolio Specialist, T. Rowe Price U.S. Equity Strategies
We don’t necessarily expect the market’s first half rally to persist through the back half of the year and think that even if the market consolidates around current levels into year end, it would be a positive situation overall. Indeed, the strength of the first half market advance has been somewhat surprising. The hype and excitement around artificial intelligence (AI) has played a big part in fueling positive sentiment and enabling multiples to expand, but other key drivers like interest rates, earnings, and whether the economy tips into a recession, remain prominent considerations. The big question is how the underlying economy will perform and when we will see inflation stabilize, and at what level. If the Fed can orchestrate a soft landing, we believe we are well positioned to participate in an upside scenario. But, if we go into a recession, we have a defensive slant that we believe will also prove resilient and still add value relative to the market.
A soft or hard landing?
Important Information This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction. Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price. The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction. DIFC - Issued in the Dubai International Financial Centre by T. Rowe Price International Ltd which is regulated by the Dubai Financial Services Authority as a Representative Office. For Professional Clients only. © 2023 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc. 202309-3121746
1) Firmwide AUM includes assets managed by T. Rowe Price group of companies and its investment advisory affiliates, as of 30 June 2023. 2) The combined U.S. Equity assets under management of the T. Rowe Price group of companies as of 30 June 2023.
Jadwa Investment Alistithmar Capital NBK Capital
Jadwa Investment
GCC
Integra Jadwa Investment Kuwait Financial Centre 'Markaz'
Middle East & North Africa
T. Rowe Price CPR Asset Management Wellington Management
Global Equities: Everything Changes, So Focus on What Stays the Same
• Total Assets Under Management: US $1,399.4 Billion (1) • Total Equity Assets Under Management: US $732.2 billion (2) • 500+ equity investment professionals worldwide • 259 equity research professionals worldwide
T. Rowe Price Global, International, and Regional Equity Capabilities:
There have been three key surprises in 2023. First, a warm winter spared Europe with energy prices going from an icy headwind to a pleasant tailwind. Second, the Chinese economy proved less robust than investors expected as it emerged from its zero-COVID policies. And finally, the artificial intelligence (AI) wave exploded into markets, with semiconductor company earnings driven higher by panicked spending from internet giants keen to be at the forefront of the AI revolution. We were positioned well for the third surprise.
COVID Distortions Have Muddied the Water
The aspect of the COVID cycle that confounds top-down thinkers the most is how U.S. Federal Reserve (Fed) rate hikes have failed to inflict significant pain on the global economy. Fed hikes are always dangerous because they are a catalyst for synchronized economic slowdowns. Hikes can lead to “black ducks”—chances for unexpected crisis—that sometimes turn out to be “black swans,” but not always. Rate hikes also tend to set credit cycles in motion that are contagious and bring economic subsectors and regions into a harmony of slowing sales, earnings, capex, and rising unemployment. No doubt, rising rates and the increased cost of capital will slow the global economy, but the questions are when, at what level will rates bite, and is there sufficient synchronization of a credit cycle to set off a major recession. The twist of the COVID cycle is that consumers and businesses did a good job of “terming” out their debt through better mortgage and high yield bond refinancing. The flood of deposits that filled consumer and business bank accounts softened the shock of higher rates and have fended off crisis so far. Meanwhile, pandemic-related supply chain and labour disruptions prevented companies from pursuing major fixed asset investments. Like a rich kid with a stubborn trustee, the money was kept safe and only moderately misspent on some cryptocurrency and exercise equipment. The result has been a lack of synchronization of “bad” things, continued strong employment trends, and a “too slow” bleed of excess savings. The bears have been frustrated by mistaking ducks for swans.
Geopolitical change has been a hallmark of the post-COVID world, with the Russian invasion of Ukraine altering Europe’s energy landscape. Meanwhile, the steady deterioration of the relationship between the U.S. and China has led us off the efficient frontier for global markets in terms of logistics, labour, productivity, and capital investment. The U.S. and China are tangibly focused on reshaping their worlds for a more competitive future, despite the bounty of the past 30 years of linked growth. It is virtually impossible to decouple the two giants anytime soon, but there is no doubt that the U.S. is seeking to secure its supply chain—onshore or “friend shore”—and China wants to find ways to break the U.S.’s technological constraints. This will result in the need for new relationships that will require new investments. The key for equity investors will be identifying the companies and regions that can win from the realignment. COVID money and geopolitical tensions have also acted to extend inflationary pressures, despite the fortuitous short-term release valve of a slow China recovery and unexpectedly low energy prices. Sticky inflation will mean sticky interest rates, something the Fed has clearly signalled in describing a policy of higher rates for longer. This does not mean that we will not have short-term periods of economic acceleration and deceleration, but—in general—interest rate cuts and a return to “secular stagnation” seem unlikely in the near term.
Need for Supply Chain Independence Will Extend Inflationary Forces
Laurence Taylor
Portfolio Specialist, T. Rowe Price Global Equities Strategies
It is important to stress that a changing environment does not change our investment framework. We look for quality companies in which we have insights into improving economic returns in the future, and we do not pay too much for them. This framework is well suited for a changing world, but it requires the resources to recognize where change is happening. That is why the research platform at T. Rowe Price is crucial to our ability to be repeatable. Overall, our portfolio now looks different from the one we owned from the global financial crisis through the pandemic. New opportunities are opening, while others are closing. We are managing the portfolio in a more balanced way across sectors and factors, with the goal of maximizing capture ratio, hedging exogenous geopolitical shocks while preserving the bulk of our positioning for idiosyncratic stock picking.
Operating in the New Environment
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Tackling uncertainty
The year 2023 has been marked by significant uncertainty, starting with debates about major economies having a soft landing and followed by rumours about not having recession at all. Geopolitical tensions, slowdown in economic growth, higher inflation, and the probability of a recession in the US have kept investors as well as fund selectors awake at night. As we approach the end of this volatile year, which has made investors reevaluate their market positioning, we talk to some of the region’s biggest fund selectors to understand what strategies they are adopting to ride out market volatilities. The fund selector community in the Middle East remains cautious on the equity space, and lies in wait for a market correction or improvement in investor sentiment. On the other end of the spectrum, money market funds have attracted many investors, given the higher-for-longer situation. Given market uncertainties, selectors favour mutual funds as they offer investors the ability of diversification. This reduces investment risks and helps preserve their wealth, especially during market volatility. To navigate through next year, a well-diversified asset allocation is important for investors, irrespective of their risk appetite. Selectors across the board agree that stark regulatory disparities across each country present a formidable challenge for distribution of funds in the region. Advising clients effectively in terms of when and how to apply mutual funds correctly in a portfolio also poses challenges in an under-penetrated industry. There is a lot of room for growth for the Shariah compliant product space, as supply of such products has always fallen short of meeting overall demand. Selectors believe there remains a need for product standardisation and regulation. We believe this special selector edition will bring a new perspective to your investment approach, and we hope you enjoy reading it as much as we did in compiling it.
The big themes in markets this year were fear of recession and interest rates . How has this impacted your mutual fund business - from a trends and uptake perspective? Client have shied away from building significant market directional equity exposure in line with LLB's house view, which is currently underweight in the equity space. Clients have, however, selectively added to credit-based strategies in the Frontier, Emerging and investment grade space as yields were attractive and risk/ reward made sense. Why should clients be investing in mutual funds at the moment? In today's volatile market environment underpinned by a higher interest rate regime, active management is paramount. Investing in mutual funds negates the need for the client or investment advisor to actively monitor and manage single-line positions, or worry about corporate actions pertaining to specific companies. It is done by the fund manager or specialist themselves. Most importantly, mutual funds, especially from the credit space, are the best investment vehicle from a risk management perspective. This is because they ensure diversification, and reduce the effect of overall portfolio returns from being adversely affected by defaults, for example. What are the gaps in your fund product shelf you are looking to fill and why? In a world of higher rates for longer, generating returns becomes more challenging as one needs to be more dynamic. Classic index tracking securities will not reap the returns that have been achieved in the past through passive investing. Niche alternative strategies, such as distressed debt and special situations strategies etc, gain importance at this point. In addition to niche alternative strategies, actively managed long-only strategies focused on regular income generation are also valuable additions to product offerings. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? If yes: Why and which alternative sectors are on your product shelf? Yes, we do. The LLB product shelf is actually very comprehensive and covers the broad spectrum of alternative investment strategies – equity long or short, global macro, private debt, CTAs market neutral strategies, private equity, real-estate, convertible bonds, CAT bonds and multi-strategy, to name a few. Depending how and in what combination Alternatives Investment Strategies are applied to a portfolio determines the reasoning behind adding them to diversified portfolios. In general terms, such strategies either serve as alpha generators or diversifiers to mitigate risk by reducing a portfolios overall market beta. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? There are no real headwinds per say. That said the only challenge exists in advising clients correctly in terms of how and when to apply mutual funds correctly in a portfolio context. This comes down to educating investment advisers (RMs) correctly, in terms of how and what they advise their clients. Are Shariah compliant funds meeting your expectations and what can asset managers do to meet the demand for shariah compliant products? There is a lot of room for growth in the Shariah compliant mutual fund space as the overall industry-wide product pallet is extremely limited, despite of high demand for Islamic products in the GCC. The challenge with Sharia compliant mutual funds is that the investment universe is not broad enough, which leads to a lot of duplication across competing products and their underlying securities. Manager diversification is therefore not easily achieved. Further, because of too much Shariah compliant capital chasing too few securities, has often led to Shariah compliant securities being over-valued Vs non-Shariah comparables of same quality. The pool of investment managers specialised in Shariah compliant investing is also not large, thus limiting managers to sticking to simple long only strategies both in the equity and fixed income (Sukuk) space.
Investment counsellor Liechtensteinische Landesbank
A. Hameed Khonji
The big themes in markets this year were fear of recession and interest rates. How has this impacted your mutual fund business - from a trends and uptake perspective? Rate Hikes are like medicines, they can treat but they have side effects and they can be dangerous if overtaken, hence a tapering dosage is prescribed by doctors when things start to look better. That is the awaited case in interest rates, the move from tightening to an easing environment. As the rate hikes coming to a slowing pace, we have been able to continue building positions for clients in income yielding space. This is mainly in bonds or Sukuk Funds and the Multi-Assets Fund, as yields continued to be at attractive levels with markets, allowing a decent time in this round until date, to build the positions. The way markets have moved helped to get in at favourable levels earlier in 2022-2023, and with the investment time horizon assumed, we believe clients will see the fruits by 2025. We have remained cautious on equity space on the rally seen which went faster than us, with lower positions. However, we expect to start taking positions gradually as and when any correction is seen, or any sentiments improvement is witnessed. So in general, flows was not impacted as bonds market helped, and we believe we aligned with many others who preferred this asset class in 2023. Why should clients be investing in mutual funds at the moment? Mutual Funds are an excellent channel to invest in any asset class. This is because it provides investors with diversification, access to expertise of the fund managers and active management, which is key in volatile markets, that helps in optimise risk adjusted returns. The current time does give a very good entry levels at attractive yields for those seeking income through multi-assets or fixed income funds, hence this is available through mutual funds. While in the equity asset class, the uncertainties associated with how the markets will behave due to the rising geopolitical concerns and the interest rates decisions, causing high market volatility, makes it wiser to invest through diversified funds managed by experts in the field. The investment that we have routed through Mutual Funds this year outweighed those done in direct picks significantly, which was a major trend to us. What are the gaps in your fund product shelf you are looking to fill and why? We believe that we already have a very good variety on shelf, but if we were to add more, we would look on to country specifics, regional funds for regions like LATAM, MENA, alternatives and Real Estate. We also may consider Money Market Funds. In general, we are open to hear about any unique funds in the theme or the profile and in their returns. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? Yes we do Why and which alternative sectors are on your product shelf? We currently do have in our white list commodities related funds/ETFs, Gold mainly. The reason is demand driven as clients are looking to put some allocation to Gold. In alternative space for future additions, we aim to select those funds which are really showcasing unique ideas, unique returns. We have come across Private Equity, Private Credit, Venture Capital, yet we have not taken the step, we certainly are looking filter excellent offerings to our clients as we go. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? Mutual Funds are increasingly becoming popular in the middle east. There are lots of opportunities for it to see further growth, if the reach-out efforts increased to mobilize the investments execution, and initiatives for extensive awareness sessions on importance of smart money management from early ages. A big window of opportunity is present in the space of digitalization of investing in Mutual Funds, which is a step we have taken at Ahli Bank. Our clients now can invest in Mutual Funds from the comfort of their hands through our Digital Wealth portal in our Internet Banking or Mobile Banking application. The headwinds though, may also be present in the digital area as well, as we witness the emergence of many fin-tech solutions that provides access to direct investment instruments, which becomes popular among the youngsters. Are Shariah compliant funds meeting your expectations and what can asset managers do to meet the demand for shariah compliant products? In Sharia Space, most of the funds that we came across are either pure Sukuk or pure Equity, I would be happy to come across a multi-asset income funds investing in a mix of both with high yield and monthly distributions. In terms of returns the present Sukuk funds does provide acceptable returns on their risk levels so meeting our expectations. Islamic Fund providers can also aim to bring Alternative Sharia Compliant Investments.
Head – wealth management Ahli Bank SAOG – Sultanate of Oman
Ali Abdul Majeed Al Lawati
The big themes in markets this year were fear of recession and interest rates. How has this impacted your mutual fund business - from a trends and uptake perspective? So far, our unit linked business has grown this year, despite the recession fears and the high interest rate environment. Our investment offering is well-diversified and caters for clients with different risk profiles, which help us navigate times of uncertainty. Nonetheless, risk assets such as equities have performed well year to date, particularly US large cap growth companies. On the other side of the risk spectrum, money market funds have attracted many investors, as yields have not been this high for more than a decade and in general yields on money market funds remain above those of bank deposits. Why should clients be investing in mutual funds at the moment? I believe clients should always have a core allocation to mutual funds. Funds offer many advantages to investors that are hard to replicate through other vehicles including accessibility, diversification, competitive pricing, liquidity and active management. What are the gaps in your fund product shelf you are looking to fill and why? We have not made many changes to our investment offering this year. We believe our investment proposition is well balanced and offers a good selection of managers across the asset classes and sectors, we consider suitable for our customer base. We are very careful with new fund additions as we don’t want to over expand our offering. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? No, we don’t have an alternative offering besides direct gold. Why not? What are the headwinds for alternative products in the wholesale / retail market? Most of the hedge fund type of strategies have historically struggled in the region. I believe they may be more difficult for customers to understand. Generally, they can be a black box and tend to be leveraged and fees are higher relative to plain vanilla strategies. Private markets are generally too illiquid for our customer base. However, we have seen growth in the availability of new open-ended vehicles with some degree of in-built liquidity in private credit, in general liquid vehicles where the underlying assets are not liquid, is a risk that needs to be considered, particularly at this stage of the market cycle. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? In the UAE, the mutual fund industry is going through regulatory changes, that still need to be fully digested, particularly in the distribution of international funds. Schemes like the DEWS in the DIFC and changes to the end of service gratuity scheme on mainland, could create a whole new pension market, that could potentially expand to other Gulf countries in the future. One headwind is the difficulty to channel household savings into mutual funds or savings products, as the bulk of the population struggle to understand the concept and advantages of investing in mutual funds. This is an under penetrated industry in my opinion and there is a need for more education.
Head of fund management Gulf MetLife
Cristobal Lopez
The big themes in markets this year were fear of recession and interest rates. How has this impacted your mutual fund business - from a trends and uptake perspective? We have a long banking history in the Middle East and have been in the UAE since 1958. Staying close to our clients and their needs helps us navigate the trends better. On other note, this year has been an example of where the ‘time in the market’ versus ‘market timing’ debate has been initiated again. We believe that a strong foundation portfolio overlaid with short-term opportunistic ideas is the right approach. Furthermore, it is extremely important to stay close to our clients during uncertain times. Why should clients be investing in mutual funds at the moment? Most clients investing in mutual funds have a clear set of goals. This requires a disciplined approach to investing, which is offered by these investment vehicles. More importantly mutual funds offer a convenient way for investors to access a diversified pool of assets. This reduces their investment risk and helps preserve their wealth, especially during uncertain times. However, we believe that clients should: • Avoid excessively timing the market • Make use of declining prices to build longer-term positions Investors should also steer clear of panic sales through considering whether selling after a fall is in line with long-term goals. What gaps in your fund product shelf are you are looking to fill and why? We have a wide range of products on our shelf ranging from thematic, multi-asset, fixed income and equity asset classes. Along with that, we have added funds in liquid alternatives, inflation protection, ESG focus and Shariah-compliant offerings. In terms of further enhancing our capabilities, alternative assets is an asset class we would like to further develop for our clients. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? Yes, we have alternative offerings that range from liquid alternatives to traditional alternative products. Why and which alternative sectors are on your product shelf? We have products ranging from private credit, private equity, US real estate, European real estate, infrastructure and secondaries, to name a few. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? The regulatory changes which have been implemented in UAE bring a unique space for the mutual fund space in this region. There is a scope of first mover advantage along with pockets of opportunity not only in UAE but across the Middle East. With numerous fund houses setting up their offices in the Middle East, this is an exciting time for the region which can change the landscape for the coming decade.
Director, investments, Middle East Standard Chartered
Gaurav Sharma
The big themes in markets this year were fear of recession and interest rates. How has this impacted your mutual fund business - from a trends and uptake perspective? The year has turned out to be very different as far as financial market performance is concerned. The markets expected a recession in US sometime during the year, while the economic data coming out has been extremely strong with equities staying buoyant, while the Fed has been raising the rates throughout. This has been a unique situation wherein clients having a risk off stance have not been able to participate in the equities, while the attractive yields on the short term papers and fixed deposits have driven them into allocating more money in these safe havens. This has impacted the flow of business in most part of the year, while there have been investors who have been looking at the opportunity offered under the Quality fixed income space, with very attractive yields available to lock for long term. Why should clients be investing in mutual funds at the moment? The mutual fund offerings have evolved with time and there has been a fair bit of innovation with regards to the access to the financial markets, which is provided through mutual funds. There has been a fair bit of volatility in both fixed income and equity markets and given the expertise require to decipher these opportunities, mutual fund managers provide a great avenue, through which the investors can access these and build up long term diversified portfolios. What are the gaps in your fund product shelf you are looking to fill and why? At Mashreq, we have been working with multiple global managers, providing the best of the solutions to our clients. While Public markets have been well represented on our platform, we have been working through the year to add private market strategies. The Private market access has been opening up specially on the wealth space in the last two years and presents some interesting opportunities. Given that there has been an under allocation of Alternatives and Private markets in client portfolios, it represents a great opportunity for clients to build up some of their portfolio allocations into these offerings. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? We have been working in the space and have been in different stages of due diligence with various alternative managers. We have opened up some interesting opportunities through this, starting off with doing a fund providing exposure to medical clinics in the US. We have recently launched certain funds with opportunities to participate in the Private credit space, with a well know global player. We continue to strive to build up this platform and add to our capabilities and offerings as can be opened up for our Private Banking clients. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? The market has been evolving, both from a perspective of regulatory changes, as well as opportunities on the product innovation and accessibility. Penetration for Mutual funds has been low historically, as it's not been as easy an access for smaller investors to join the mutual fund bandwagon. We at Mashreq have been working on enhancing our digital platform whereby we can increase the reach of our solutions to a much wider audience. Our fund solutions have recently been opened up through the digital journeys, whereby clients have an access to transact into funds through the mobile banking platform. Regulatory changes may be a short term disruption but in the long run, there is ample opportunity for the mutual fund space to grow within the Mid-east region.
Vice president, investment solutions Mashreq Bank
Gurpreet Singh Vacher
The big themes in markets this year were fear of recession and interest rates. How has this impacted your mutual fund business - from a trends and uptake perspective? The financial year typically begins and ends with a blend of concerns and enthusiasm, reflecting the cyclical nature of the economy. However, this year has been marked by exceptional uncertainty. It started with debates about whether major economies were headed for a hard or soft landing. As we moved into the mid-year, a new term, 'No Landing,' emerged, suggesting that major economies might avoid a recession. Our data-driven approach revealed a misalignment between weak economic data, strong quarterly earnings from leading businesses and market reactions. These evolving perspectives prompted us to reevaluate our stance on whether the US Federal Reserve would decrease, raise, or maintain interest rates at elevated levels for an extended period. Nonetheless, our long-term horizon approach remains unwavering, despite short-term market gyrations. Top research houses’ views can significantly sway the markets, causing substantial volatility. Even with the expertise of financial analysts and experts, predicting the magnitude and timing of both negative and positive events remains a formidable challenge. The future remains uncertain and we have no control over it. Experts have often fallen short in their prognostications, yet the media prominently highlights forecasts from premier research institutions, speculating about the likelihood of a recession in 2023 or mid-2024. Instead of succumbing to prevailing themes like recession fears or fluctuations in interest rates, we focus on the rigorous analysis of the strengths and vulnerabilities of factors that can influence investment opportunities. We believe that three fundamental character traits, discipline, diligence and patience, are indispensable in any economic condition. This approach serves as an objective guide to address investor needs throughout the economic cycle. Even in times of uncertainty and market price fluctuations, our resources and long-term perspective enable us to consistently discover investment opportunities. Guided by these principles, we can meet investor requirements for satisfactory returns and efficient risk management. Our primary focus is on offering products that provide sustained, Shariah-compliant income, with the resilience to withstand short-term volatility and ensure long-term viability. Consequently, we rigorously stress-test our models, considering the potential impact of major risks, such as the aftermath of a prolonged recession and changes in base rates and stubborn inflation. In any economic environment, our decision-making process is anchored in the selective deployment of risk. Why should clients be investing in mutual funds at the moment? Mutual funds are one of many ways to allocate funds towards achieving clients’ specific financial objectives. Often, retail investors may directly invest in stocks or bonds based on media reports or news, inadvertently misinterpreting market noise as a sign of potential growth. This can often lead them to make speculative bets in the hopes of wealth creation, which, unfortunately, can result in significant financial losses, putting a substantial portion of a client's life savings at risk. Mutual funds and Exchange Traded Funds (ETFs) present investors with a compelling alternative to direct investments in various asset classes, including equities and bonds. These investment vehicles, known for their inherent diversification and rigorous regulatory oversight, provide a crucial layer of financial safety and security that investors value. Nevertheless, the world of funds is anything but simple, encompassing various types, including hedge funds, money market funds, equity funds, fixed income funds, index funds and more. Furthermore, the investment landscape is in a state of constant evolution, with ETFs increasingly making inroads into the cryptocurrency arena. Leading asset management firms, such as BlackRock, are actively exploring the development of new Bitcoin-focused ETFs. Therefore, before embarking on a mutual fund investment journey, clients should evaluate their risk appetite for a specific asset class. Once clients have identified their preferred asset class, the next critical step involves conducting comprehensive due diligence on the fund manager. This process includes an assessment of their corporate governance, investment style, fee structures that align with their performance, and a proven historical track record. In today's intricate financial market, where complexity abounds, navigating this multifaceted landscape demands a thoughtful and well-informed approach to fund investments for long-term financial success. Retail investors should view funds as fundamental tools for wealth-building, provided they carefully select a fund manager and invest in the asset class that aligns with their risk appetite. The accessibility of fund investments in smaller denominations, often with minimal or no exit loads, further enhances their appeal to retail investors. As for high-net-worth individuals and corporate entities, while they have the resources to engage professionals for asset management, a prudent strategy includes allocating a portion of their assets to mutual funds or ETFs. What are the gaps in your fund product shelf you are looking to fill and why? We are making satisfactory progress in accordance with our product development plans. Currently, our product shelf includes active funds in real estate, leasing, and money markets. We are actively exploring the idea of offering Sharia-compliant income-generating funds to our clients, driven by the strong demand and attractive risk-reward prospects. At present, we do not identify any significant gaps in our product offerings. When considering the addition of new products, we engage in a meticulous analysis of various options before making investment decisions. Our product launches undergo a committee approval process to ensure they align with our unwavering commitment to sustainability, which forms the bedrock of Warba's long-term plans. Importantly, we do not currently foresee any products at risk of removal from our portfolio. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? Warba Bank offers Sharia-compliant multifamily real estate, leasing, and money market funds to its clients. In the near future, we are planning to introduce additional income-generating products for our clients in both the alternative and conventional space. Why and which alternative sectors are on your product shelf? These offerings are particularly appealing due to their low volatility and consistent income stream, which benefits our clients. Alternative sectors which we cover are Real Estate, Leasing and Income generating debt products. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? The Mutual Fund Space in the MENA region confronts a formidable challenge due to stark regulatory disparities across each country. Despite being considered a single region, the divergent capital market regulations in each nation create a complex and multifaceted landscape. The presence of distinct currencies in each country further complicates cross-border transactions, resulting in less-than-smooth capital flows. Some countries impose restrictions on capital outflows, and the difficulty in withdrawing cash upon investment maturity only adds to these intricacies, potentially eroding investor confidence. Due to regulatory restrictions, Fund managers must thoughtfully consider various factors while selecting the domicile or type of fund. The ability to distribute a fund across multiple jurisdictions is severely restricted as a fund manager authorized to distribute in one jurisdiction cannot distribute in another without the necessity to comply with all the local regulations. Without effective resolution of these issues, the untapped potential within these countries will remain inaccessible. Implementing regulatory reforms, facilitating ease of capital movement across nations, and establishing pathways for cross-border fund distribution hold the promise of attracting substantial assets under management (AUM) into the region's funds. Due to lack of visibility about the regional funds, investors prefer US or European funds and park bulk of their investments instead of searching some good alternative in regional markets. Are Shariah compliant funds meeting your expectations and what can asset managers do to meet the demand for shariah compliant products? The demand for Shariah-compliant products is substantial and while the supply of such products has seen significant growth in recent times, it still falls short of meeting the overall demand. Two critical factors have the potential to further accelerate the growth of the Islamic finance sector: regulations tailored to Islamic finance and the integration of financial technology (fintech). The International Islamic Financial Market (IIFM) plays a pivotal role as a global standard-setting body within the Islamic Financial Services Industry (IFSI), with its primary focus on the standardization of Shari’ah-compliant financial contracts and product confirmations. However, there remains a need for continuous efforts in regulating and standardizing Shariah-compliant products. It's important to acknowledge that while the standardization of Sharia Compliance criteria is expected to progress over time, achieving complete uniformity among Islamic scholars in their interpretation of Sharia Compliance Criteria may be a protracted endeavour. The criteria for Shariah compliance is not universally consistent and can vary from one Sharia board to another. To address this variability and provide more diverse options to investors, financial technical tools should offer customization choices to clients. Consequently, the use of technology is paramount to expanding the investment opportunities available to Shariah-compliant investors.
Senior vice president Warba Bank
Sunil Kumar Singh
The big themes in markets this year were fear of recession and interest rates . How has this impacted your mutual fund business - from a trends and uptake perspective? The Federal Reserve and European Central Bank want to see core inflation rates lower and have confirmed to adjust the policy steps depending upon incoming data. Yield curves are likely to stay inverted as monetary policy headwinds persist, thus limiting the scope for a stronger economic recovery. After an impressive first half of the year, the rally in developed market equities has lost momentum and so have flows into directional long-only equity funds. However, we continue to see activity in the rates markets. Money market funds and fixed income funds have come to the forefront in anticipation of the end of the rates cycle. They offer attractive risk reward characteristics. We have seen inflows across fixed income because it provides attractive yields plus potential capital appreciation going forward. As markets anticipate a shallow recession in the developed markets and default rate rises are already priced in, appetite for investment grade and high yield bonds in developed markets has increased. Funds have also been instrumental to promote our CIO long-term investment secular themes (LTIT). The Long Term Investment Themes (LTIT) are indicators of long-term trends that remain highly relevant in the years ahead and offer investors the opportunity to tap into growth potential of various high conviction themes. Here we implement our exposure to these themes, targeting structural changes in the economic environment. We saw adoption rates for thematic solutions increase during the COVID-19 lockdowns and believe they remain likely to grow in the years to come. We are targeting: • Resource transition; Land resources, Energy transition and Blue economy. • Population support: Infrastructure, Healthcare, MedTech, Millennials & GenZ. • Next-phase technology: Artificial Intelligence, Smart Mobility and Cyber Security. Why should clients be investing in mutual funds at the moment? Core managed solutions like funds deliver robustness to portfolios and can be ideally positioned to navigate current market volatility and to limit downside risk. They provide a diversified and regular stream of income that allow clients to take advantage of credit opportunities with a flexible duration management. This is key in the current inflation regime. In equities, bottom-up opportunistic active management is necessary to exploit market dynamics. To navigate 2023, a robust and well diversified asset allocation is crucial for every client, independent of their risk profile or appetite. Our Deutsche Bank Fixed Income ESG Fund, Deutsche Bank ESG Strategic Asset Allocation and Deutsche Bank Strategic Income Allocation Funds are medium- to long-term investment solutions that form the basis of our client portfolios. They offer a simple and cost-effective way to leverage our CIO expertise and the platform of DWS. Funds are also a means of capturing uncorrelated returns in volatile markets. We have seen a revived demand for liquid and illiquid vehicles including hedge fund strategies. What are the gaps in your fund product shelf you are looking to fill and why? We continue to source funds to service our long-term investment themes and navigate the current volatility including liquid and illiquid alternatives. Currently we are designing a strategy to build a forward-looking portfolio of alternative investments. The ambition is to provide a comprehensive deal-flow for our clients through third party partnerships with industry leaders. Alternatives and private markets have been widely discussed in the Middle East this year. Do you have an alternative offering? If yes: Why and which alternative sectors are on your product shelf? Yes, we have a strategic ambition to build a comprehensive open architecture alternatives platform. On Alternatives, we have several solutions: We have a market-leading managed account liquid alternative platform. One of the first and largest unfunded managed accounts platforms that has won numerous industry awards. Our clients have access to a breath of strategies and managers including managed futures, FX, systematic risk premia and overlay strategies. We are now in an exciting period for European infrastructure development. Change is being driven by sustainability and security considerations, underpinned by large-scale policy support and technological advances. We are offering an infrastructure fund. The fund focuses on small / low-mid cap infrastructure companies seeking to promote positive ESG impact. In addition, we have a perpetual, open ended liquid real estate structure that provide access benefits to two leading institutional US private real estate funds through one simple vehicle. At the beginning of this year, we successfully closed the Tech Venture Growth Fund (TVGF), offering our clients access to a diversified European Venture Capital investment portfolio in privately held companies with the potential to disrupt entire industries. Structurally, what are the headwinds and opportunities for the mutual funds space in the Middle East? The regulation is currently the biggest challenge for the distribution of funds in the UAE but interests and opportunities are high. Stocks and bonds are essential to a balanced portfolio but, of course, they do not have to be the only components. There are a variety of alternative asset classes available to investors depending on the objectives they wish to attain with their portfolios. • Investors seeking a yield in excess of the market return (positive “alpha”) may want to investigate actively managed illiquid investments such as private equity, private debt (non-bank corporate financing), venture capital and infrastructure investments. • Investors hope that these will improve the diversification of their portfolios, deliver reliable and high returns and provide a certain degree of protection against inflation. • Investors looking to hedge their portfolio against inflation might look to real estate, especially as rents can rise faster than the inflation rate during phases of high inflation and infrastructure that provides inflation linked cash-flows. Source: CIO Outlook, October 2023
Director, investment manager (Middle East, Dubai) Deutsche Bank
Vanessa Garrido
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