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3i Capital Group may have recently established its Middle East base in Dubai, but it is looking much wider when it comes to its investments.

With its other offices in New York and Malaysia, the group aims to draw on its knowledge of different markets to deliver strong returns.

It recently launched Enmaa', the Dubai Growth Fund, a US$100m global Shariah compliant mutual fund registered in the British Virgin Islands that aims to achieve a 25% return on investment annually.

"Our fund is quite flexible compared to other funds here because you find most of them are quite focused on the region: either a Dubai fund, or a UAE fund, or a MENA fund," says Dr Akram Yosri, managing partner, 3i Capital Group. "The problem here is, in terms of risk mitigation, you find that when the industry or the market is down for whatever reason you get hurt. Tumultuous market conditions could impact performance of a fund quite a bit, but with a global mandate you have the opportunity to really hedge, to distribute your assets widely."

The fund looks for pre-IPO opportunities as well as undervalued public equities worldwide. "We identify values and when we find them we take a position in them," says Yosri. "Our objective now is to maximise the opportunity but at the same time mitigate the risk. You'll find that today's kind of investor is not willing to have the same kind of risk that he had in the past."

The fund does not focus on any particular industry sectors, giving it further freedom in its investment decisions. "We are flexible but we are comfortable with certain industries - we like the financial industry, but you don't see a lot of depth here. There is a very limited allocation of opportunities," says Yosri.

"We look for industries with sustainable growth. We like the predictability of the revenue stream, and we try to stay away from those industries with fluctuating revenue, that are subject to unexpected market conditions. We try to stay away from those, or when we take a position we take it for a short period of time, not on a long term basis."

The Enmaa' fund has already proved attractive to investors from the region, with the investor base no doubt broadened by its low minimum investment of US$1,000 and the decision to waive its 2.5% placement fee for female investors, as part of its arrangement with co-sponsor Dubai Business Women Council.

3i Capital Group tries to analyse the make-up of its investor base to find out who they are and why they are investing.

"We have the high net worth individual, but we also have the small investor that doesn't want to risk much yet likes our growth strategy," says Yosri. "People are not willing to take the kinds of risk they used to take in the past - they don't want to put all of their eggs in one basket. They don't want to take the risk of managing their own funds.

"Not every investor can be a successful portfolio manager. You have to detach yourself from the investment, you cannot be emotionally attached to it.

"If you see the correction that happened a year and a half ago in the GCC market, you see that most investors are more cautious than they were in the past. The irrational exuberance is no longer there. People aren't willing to take the risk. They know that they're better off staying with professionals that know how to manage money, and when to take a position and when to get out."

The fund has made a deliberate decision to appeal to retail investors, as well as the high net worth individuals traditionally targeted by funds.

"Everybody for the last 20 years has been going after the top 2% of the market, so to go after the other 98% you need to have a very strong, eloquent message," says Yosri. "For us, the growth potential is tremendous."

Part of its approach to attracting a new kind of investor is through product innovation. 3i Capital is working on launching an Islamic ETF (exchange traded fund) on Dubai Financial Market by the end of this year. It will also develop a real estate fund, based on the group's experience in investing in the sector in the UK.

"It's going to be hybrid, it's not going to focus on a single market," explains Yosri. "It's going to be spread quite nicely and expected return on it is going to be along the lines of 25% annually, if not more. This is going to be $100m, but it is likely to grow to $300m.

"We are very bullish on the Saudi market and we are in discussion with a number of Saudi institutions to partner with us on launching this fund. All the indicators we're getting so far are that we would need to scale it up higher, especially in the Saudi market - there is a tremendous opportunity there."

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