Majid Al Futtaim looks to bring family experience to bear on MENA opportunities.
Majid Al Futtaim Asset Management looks to bring its family office experience to bear on MENA-based opportunities for regional and international investors.
In May of this year, Majid Al Futtaim Asset Management, the asset management arm of the Majid Al Futtaim Group, announced the launch of its first MENA equity product; the Elite MENA Equity Fund. The fund, which promises a ‘risk-managed growth' approach, stands out for several reasons - it is one of the first funds in the region to be born from a family office, with the newly established MAFAM building on the seven year track record of Majid Al Futtaim family office, and it is also one of the largest MENA equity funds available, with US$150 million seeded from the family office. Arabian Banking & Finance spoke to Iyad Malas, CEO of Majid Al Futtaim Asset Management and acting CEO of Majid Al Futtaim Group, to discuss the long term plans for the fund, and what investors are looking for in difficult times.
Our strength lies in the fact that we are from this region, working for the long-term.
How was the family office switched into an asset management organization?
In 2002, Majid Al Futtaim, the President of the Majid Al Futtaim Group, was looking for a team of investment experts to manage his personal wealth. So he set about building a team, establishing one of the UAE's first world class family offices operating to international standards of transparency and governance.
Now this family office, one of the most respected in the UAE, has opened its doors in the tradition of other family investment offices in mature economies and is offering services through Majid Al Futtaim Asset Management. MAFAM was established in October 2008 and transferred all of the staff of MAF Trust to the new company. MAFAM is a DIFC-based and DFSA regulated asset management company. This approach gives institutional and professional investors access to an exceptional team of fund managers with a proven track record of stock selection, investment strategy and risk management.
The investment philosophy behind Majid Al Futtaim Asset Management is one of preserving capital, providing superior service and operating in accordance with international corporate governance best practice.
Why was it decided to make this move?
The proven track record of the fund managers, and the strength of the Majid Al Futtaim Group, led to a strategic decision to open up this investment platform to third party investors. There have been a number of family offices in Europe and other markets which offer their investment expertise to external investors and the Majid Al Futtaim Group has followed this precedent in launching Majid Al Futtaim Asset Management.
Today, more than any other time in the past, investors need to entrust their money to managers who have the experience and who are able to prove that they have a good track record in good times and bad.
We believe that relative to the size of the MENA market, there are still very few fund managers in the region. With more than seven years of experience in managing a portfolio of MENA equities, Majid Al Futtaim Asset Management's investment team has developed an investment approach that is compelling for both professional and institutional investors.
From a Majid Al Futtaim Group perspective, we have a reputation for dynamism and for spotting and capitalizing on market opportunities, and this extends to our asset management launch. The Group operates in nine countries, employs more than 16,000 people and includes some of the region's most recognizable brands within its portfolio.
Our strength lies in the fact that we are from this region, in this region and we are working for the long-term. Why has this fund been launched now, particularly given the economic climate?
If there is any lesson to be learnt from the ‘credit crunch' of 2008, it is for investors to exercise caution when investing their money. With market conditions as they are, we firmly believe the market is looking for fund managers who preserve capital and invest sensibly.
International investors currently have limited exposure to the MENA region, which offers specific opportunities for investors including strong economic fundamentals, some attractive valuations, and an improving regulatory framework.
For regional investors, despite current turbulence, there remain within the region a number of attractive valuations which make selective equity investments possible.
What sort of investors are you looking to attract, and is there already demand for this sort of fund?
Since the public launch of the fund on 13th May 2009, we have received a lot of interest from both international and regional investors, including institutions and professional investors. When we created the Elite MENA Equity Fund, we wanted to target international investors looking for fund managers with experience working in this region. The fund is domiciled in Luxembourg to provide an international currency and transparent jurisdiction for global investors. Has the family office been completely moved into a more commercial asset management business? How will demands of the family office be balanced with demands of the investors?
All of the management team which was managing the family office moved to the asset management business. The family office has become a client of asset management company. MAFAM has a duty as a regulated entity to treat all its clients fairly.
The fund is described as having a ‘Risk Managed Growth' approach, can you explain some more about this approach?
The aim of the Risk Managed Growth is to deliver consistent returns through optimal asset allocation and stock selection while adhering to a disciplined risk management process. With this approach, the portfolio constraints are free from benchmark weights, so while the manager takes the weights of the markets and stocks into account, he has the necessary latitude to exploit market opportunities and protect capital when needed.
This approach is further supported by the fact that we are growth and value based investors. This translates into a deep understanding of the risk/return profile of each investment undertaken, which is achieved through a thorough analysis and valuation based on company visits, in-house modelling and sell-side research reports.
The risk management process also involves constraints on single country, sector and stock exposure in addition to liquidity guidelines for the overall portfolio.
The other aspect of this approach is using cash actively as a tool to further preserve capital and enhance returns.
What opportunities are most attractive in MENA region?
According to the most recent IMF estimates, the outlook for the MENA region is good. While other regions are experiencing a retraction in growth, the IMF is predicting a 2.6% growth in the MENA region in 2009.
The MENA region is home to about 50% of global oil reserves and 30% of global gas reserves. Investing in companies that will benefit from these resources, mainly from downstream production or distribution, can be attractive. The revenues that the governments will generate from these resources will be used for infrastructure spending in many countries, to keep up with population growth. This expected infrastructure boom will benefit sectors like transportation, real estate, energy and communications.