NBD funds outperform competitors once again

NBD's fund managers concentrate on actively building the portfolio on a bottom up basis seeking viable investment opportunities across the region. By actively managing the bank's portfolios, the fund managers closely monitor the markets and alter the investment mix depending on a number of market factors.

"Investors looking to take advantage of current market levels should do so through actively managed funds in order to minimize downside risk," stated Faranak Foroughi, Head of Private Banking at National Bank of Dubai. "Investors can be sure their money will be managed professionally by fund managers who can help preserve their capital and provide consistent performance during all stages of the market cycle."

The bank's primary objective in managing the Aafaq funds is to provide investors with consistently competitive performance, especially in emerging markets such as the MENA region. In order to remain consistent, there must be a balance of return and risk over a complete market cycle. The returns clearly demonstrate the impact of consistency on long-term fund performance. During the period December 2004 to November 2006, NBD's GBF equity portion returned 62% versus the index performance of 40%, while also clearly outperforming comparable funds over the same period.

The maximum drawdown figures measures the loss that an investor would have incurred in the event they had chosen the worst time to invest and worst time to exit. It demonstrates the lower risk levels of funds compared to the market index. On this measure, the quality of the Aafaq Gulf Balanced Fund is clearly visible, with the maximum drawdown at -13% - far better than that of peers. Furthermore, the Gulf Balanced Fund (GBF) is the only investment fund with a Sharpe ratio close to 1 at 0.93.

The NBD Aafaq funds are actively managed using a dynamic multi-strategy approach. The fund managers actively shift strategies to take advantage of market opportunities and mitigate market risks throughout the various stages of the market cycle to deliver performance. Diversification is a basic principle of minimizing risks in investments and should be taken into account at the very early stages of planning and launching a fund.

Fund managers must remain disciplined and adhere to their investment philosophies when making investment decisions. This is what enables a fund manager to maintain stability during a complete market cycle. In line with the fund's strong emphasis on capital preservation, the strategy of the managers for the fixed income component of the GBF was to confine the bond portfolio entirely to floating rate notes and minimize interest rate risk in a volatile interest rate environment.

The MENA markets compared to many other emerging markets appear to be far more resilient and better-placed to weather corrections. Going forward, the majority of the region's companies are likely to experience healthy earnings growth arising from multiple drivers.

"We believe that the recent regional correction is an inherent part of emerging markets such as the GCC, given that the strong run-up in prices had pushed valuations well above intrinsic values," concluded Faranak Foroughi. "Having ridden the speculative bubble last year, investors now appear to be seeking stocks that are fundamentally sound with sustainable growth, be it short term or long term."