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Tue 1 Feb 2011 06:23 PM

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Egypt crisis marks buying opportunity for funds

Long-term opportunities can be gained from current geopolitical risk, says analyst

Egypt crisis marks buying opportunity for funds
Fund managers should consider geopolitical difficulties as an opportunity for long-term investment, says Russell Investments

Despite regional stock market jitters caused by instability
in Tunisia and Egypt, fund managers should consider geopolitical difficulties
as an opportunity for long-term investment, one financial expert has claimed.

“Yes, absolutely, I see it as a buying opportunity,” Pascal
Duval, executive managing director, EMEA, for Russell Investments, told
reporters in Dubai. “Geopolitical risk is something that investors have to live
with.

 “The way that we
think about it is that the issues that are happening in Egypt and Tunisia,
obviously, the markets are responding to those on a short-term basis.

“But often, from our perspective as long-term investors,
they provide opportunities so within our overall portfolios we have minimal
exposure to Egypt, but that’s partly due to the fact that it doesn’t make up a
large part of our overall benchmark.”

Russell Investments is planning to open an office, possibly
in the Dubai International Financial Centre, in the UAE during the first half
of this year.

The company is aiming to create a new set of regional funds
amounting to up to $10bn worth of assets under management over the next five
years.

Russell signed a deal with the Saudi Tadawul stock exchange
in the third quarter of last year, and company officials also confirmed they
were in talks with the Abu Dhabi and Dubai bourses to partner in the UAE.

Duval indicated that local bourses would benefit from
rationalization, including potentially merging some indices.

“There’s a lot of potential by rationalising the way they
are structured today, potentially bringing them together to make it a bigger,
more liquid, deeper opportunity set in terms of investments,” he added.

“One of the main problems in the region is the liquidity
issue. It’s not that much in terms of assets, because the quality of assets is
very high, but there’s a credit issue and a liquidity issue.

“So rationalising, making the stock market more liquid, with
more depth, instead of just having 30 or 40 stocks listed, bringing in 100
stocks, and bringing in a wider array of sectors – all that would help,” Duval
said.

 

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