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Mutual Admiration Society

There is really no such thing as a cast-iron, rock-solid, 100 per cent-safe saving scheme or investment scheme. If anybody tells you different, don't believe them! Not even government-backed bonds are absolutely safe. You think governments don't go bust and repudiate their debts? Ask any family whose great grandfather invested in old Czarist or Chinese railway bonds from the Nineteenth century. Even governments can go out of business!

Choosing investments is not just about maximising your return, it is also about managing your risk. You may feel uncomfortable with the idea of picking your own shares or bonds to invest in, preferring to leave such decisions to the experts. So what about collective investing?

A collective or mutual investment is a fund that takes money from a number of private investors and pools it together. A professional fund manager will then use his (or her) skill to increase the value of the funds under management by investing in a portfolio (or wide range) of shares, bonds, etc., depending on the investment mandate of the fund. In future issues we’ll be taking an in-depth look at individual funds, interviewing fund managers about their investment styles and decision-making processes, offering you valuable insights into how they invest your money.

It is important to remember that the value of investments, and the income they generate, can fall as well as rise and there is no guarantee that you will receive back the amount originally invested.

ROYAL CAPITAL MENA FIXED INCOME PLUS FUND

The Royal Capital MENA Fixed Income Plus Fund is Royal Capital’s first investment fund. It is structured as an open-ended Bahrain-registered collective investment scheme and is restricted to institutional and qualified high net worth investors. The Fund aims to offer a diversified, risk-controlled exposure to fixed income (bond) markets, focusing mainly on the MENA region while retaining the flexibility to invest opportunistically elsewhere.

Royal Capital, a financial services company based in Abu Dhabi, says it plans to launch a number of other funds during this year.

The Royal Capital MENA Fixed Income Plus Fund is dollar-denominated and is benchmarked against the HSBC Middle-Eastern Aggregate Index. The minimum subscription is $250,000 for initial investments and $100,000 for any further investments. There is a one per cent management fee.

EMIRATES MENA FIXED INCOME FUND

The Emirates MENA Fixed Income Fund is being managed by Emirates NBD Asset Management. This open-ended dollar-denominated fund, waims to achieve a high level of income as well as capital growth, through investing in a portfolio of fixed-income instruments, predominantly from issuers in the MENA region. Key features of the fund include access to a diversified portfolio of MENA fixed income securities, option of semi-annual income distribution, open-ended with weekly dealing, and an estimated yield of approximately six per cent.

“The launch of this fund coincides with an increase in demand for fixed income funds in the region over the past year,” said Deon Vernooy, Head of Emirates NBD Asset Management. “With recent developments in the regional fixed income fund market, the next three quarters will be an opportune time for investors. There is now increased clarity in the risk/return profiles of existing and new issues providing a more attractive platform for investment.

“As one of the largest asset management businesses in the region, Emirates NBD Asset Management offers investors a team of more than 40 financial specialists from 10 different countries. This enables us to provide investors with access to professional management and research at relatively low minimum requirements.”

Minimum initial investment in the fund is $25,000 and minimum top-up is $10,000. Charges are up to three per cent initially with annual fees of 1.25 per cent.

AL RAYAN GCC FUND

Launched by Qatari-bank Masraf Al Rayan, the Al Rayan GGC Fund, managed by Al Rayan Investment, is a Shari’ah-compliant value fund that is taking a medium to long-term perspective, investing in GCC listed equities as well as fixed-income and money-market instruments. Where possible, the Fund will seek to take an activist investment approach.

In a statement made to the Qatar Exchange, Dr Hussain Ali Al Abdulla, Chairman and Managing Director of Masraf Al Rayan, commented, "The outlook for GCC economies and the development of the region's capital markets is very exciting. We look forward to rapid growth of the region fuelled by government-led investment and continued expansion of the private sector. We believe the time is ripe to launch a fund to tap into the region's enormous potential, especially as valuations remain very attractive. We expect the Fund's activist investment philosophy will be well received by investors within the GCC and globally."

Al Rayan Investment, a wholly-owned subsidiary of Masraf Al Rayan, is authorised by the Qatar Financial Centre and was incorporated in 2007 as the investment and financial advisory arm of Masraf Al Rayan.

FINDING INVESTMENT FUNDS

HSBC Bank has launched a range of investment portfolios for its customers that provide diversified global exposure to a mix of asset classes. The HSBC World Selection Portfolios are globally-diversified, multi-asset growth portfolios that can hold both traditional investments such as bonds and equities, as well as modern assets including commodities and private equity. Many of these modern asset classes would not readily be accessible to the private investor.

World Selection combines sophisticated investment techniques, a wide range of global investments and investment skills, monitored around the clock by HSBC. There are five portfolios in the World Selection range that cater to different levels of risk and return.

Each portfolio in the World Selection range offers the expertise of a range of some of the best fund managers, from throughout the world, chosen by the extensive multi-manager team at HSBC Global Asset Management to deliver steady long-term returns, with low levels of volatility. The portfolios will also hold passive instruments such as Exchange Traded Funds (ETFs) when it is considered these present a better risk/reward profile than actively managed funds.

Ishrat Kiyani, Head of Premier Banking and Wealth Management, UAE, HSBC, said, “The steep declines in stock markets over 2008 have been a painful reminder of the risks inherent with putting all of your investment eggs in one basket. When researching this product launch, our customers have told us ‘I don’t like the rollercoaster effect’ and ‘I’m more interested in preserving what I’ve got than risking it all.’

“That’s why it is important to diversify geographically and to hold different asset classes in order to achieve good long-term results without taking a rollercoaster ride along the way. Research by HSBC demonstrates that various asset classes will move in and out of favour at different stages in the economic cycle. By being truly diversified, this should, over the longer term, lead to smoother and more stable returns from your investment portfolio (compared to holding a single asset class).

“The role of the multi-manager is critical as no single manager is likely to outperform in all market cycles at all times. All managers have different styles and understanding these styles will give an insight into the set of market conditions where a particular manager is likely to perform well. An added potential benefit of multi-manager is that it gives customers rare access to the best-in-class fund managers.”

Minimum investment for the HSBC World Selection Portfolios is $250 per month or a lump sum of $10,000. There is a three per cent initial charge and an annual management charge ranging between 1-1.30 per cent depending on the portfolio.

Many fund managers do not directly offer their funds to the public for investment, instead opting to market their products through financial advisers, stockbrokers, banks, etc. For example, Al Rajhi Capital, the investment arm of Al Rajhi Bank and one of the pre-eminent names in Shari’ah-compliant investment management in the region, recently signed a distribution agreement with Saudi-based advisory firm Derayah Financial. According to this agreement, Derayah will make Al Rajhi Capital’s Shariah-compliant mutual funds available to individual investors through its website www.derayah.com.

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