New Gulf fund seeks to attract international investors

The three promoters and managers of the Fund - International Financial Advisors (IFA), Univest Group and Daman Asset Management - said the Fund was purposely created for IFA by Daman and Univest, to attract global foreign direct investment (FDI) flows into the high potential, but as yet under-exposed markets of the six GCC countries and Iraq.

"The IFA Khaleeji Fund has been designed with the specific intention of creating an ideal vehicle through which institutional international investors interested in the region could find a perfect single-entry point into the Gulf markets," said IFA Group Chairman, Mr. Jasim Al Bahar.

"Our objective is also to globally better position the Arab Gulf as the emerging market with high potential. These markets are well-known to Gulf investors, but are a new frontier to investors beyond the region," added Mr. Jasim Al Bahar.

Pulling Money
"And, in addition to the buoyant GCC markets, this Fund provides a truly unique opportunity to provide Iraqi equity exposure to investors, with all the promise that such exposure entails so early in the rebirth of this economy," he pointed out.

The Arab - and especially Gulf - governments are in high gear to attract FDI - which at present is less than 1 per cent of total global flows.

"One of the factors behind this dismal record is the lack of avenues for investment in the Arab world and a level of transparency that does not meet the bare minimum standards acceptable to international investors. We created the IFA Khaleeji Fund to pull money into the region's equity markets by acting as a channel for potential global investors," said Mr. Shehab Gargash, Managing Director of Daman Asset Management.

Due Diligence
The Fund takes into consideration several important features for the international investor - it has a level of transparency in the private placement memorandum that is seldom seen in the region; a seven-member Board of Directors that reflects the diversity of the Fund's investors; a strict due diligence regime for investors; an efficient jurisdiction that is well known to international investors; the ability to automatically reinvest dividends to avoid taxation and the publication of the Fund's net asset value (NAV) in the London-based Financial Times.

Mr. Abdulwahab Ahmed Al Nakib, Founder & CEO of Univest Group, said the IFA Khaleeji Fund is intended to help build the "trust factor" for Gulf capital markets among global investors.

"Univest Group added a unique feature by utilising its valuable global relationships and introducing Christopher D. Brady of USA-based investment bank, The Chart Group, to the board of IFA Khaleeji Fund. Chris has extensive experience in structuring country funds and brings a lot of insight and value to the Fund's structure and progress," Mr. Abdulwahab Al Nakib added.

He pointed out that: "Like Chris, our Board includes some other members from beyond our region. We have also had reputed lawyers from the UK, the USA, the Cayman Islands, UAE and Kuwait working on the Fund. We have done thorough due diligence and the Fund fulfils a superior level of integrity demanded by international investors".

Excellent Timing
"I have focused on international investing as an investment banker for over 20 years. In addition, I have created numerous country funds representing hundreds of millions of dollars invested in emerging markets. I view the IFA Khaleeji Fund as being similar to The Korea Fund, which grew ten-fold since its inception in 1984," said Mr. Brady.

"The GCC and Iraq represent an entrepreneurial region with substantial resources and a well-educated population. The timing of the IFA Khaleeji Fund is excellent as international investors will be looking for just such a vehicle to participate in the development of these economies," Mr. Christopher Brady added.

Each of the three partners brings their own strengths to the IFA Khaleeji Fund.

IFA is listed on the Kuwait Stock Exchange and is a respected regional finance house. Its expertise ranges from investments and asset management to property in exclusive developments such as Palm Residence in Dubai, UAE; Thohoor Al Abadiya in Lebanon; Zanzibar Beach Resort and the Zimbali Coastal Resort in South Africa Moreover, it recently acquired a controlling stake in Bank of Kuwait & The Middle East.

Univest Group is a rapidly growing international investment firm - in the past three years, it completed six regional and international private equity projects in various industries. The IFA Khaleeji Fund is its second within its asset management side division, which Univest is expanding to a suite of funds, each with a different focus and investment objective. Univest Group also focuses on real estate investments as well as advisory and restructuring projects.

Daman Asset Management has won recognition for its highly successful flagship product, the Daman UAE Value Fund, and more recently with its Daman Iraq Fund, giving it a reputation as an undisputed pioneer in the fast developing Iraqi market.

Combined Expertise
Their creation, the IFA Khaleeji Fund combines the recognised financial expertise of the three promoters. It was developed as an institutional investment vehicle by UAE's Daman Asset Management and Univest Group of Kuwait and has benefited from IFA Group's extensive network and market knowledge.

"The key to the IFA Khaleeji Fund is its innovative characteristics and its professional management. It is based on a simple notion of letting the best asset managers in each market manage the funds allocated to that particular market. Therefore, some of the best GCC fund managers are being mandated with the task of contributing to the overall performance of the Fund," Mr. Shehab Gargash said.

"These are best of breed managers who are given specific targets and goals to achieve. And when the very best are given such goals, we can be certain they will do their utmost to impress," he pointed out.

The promoters are launching the Fund with a seed capital of US $10 million. The IFA Khaleeji Fund will invest in Gulf stocks as well as in Iraq - where Daman Asset Management was the first to enter with its Daman Iraq Fund launched in January 2003. Daman has experience and an extensive infrastructure in place, which would be available to the Fund.

Regional equities have been performing well and there are indications that liquidity will remain at solid levels for quite a while as is evident from continued stock market activity throughout the region.

Strong Fundamentals
Limited investment opportunities, historically low interest rates, healthy corporate earnings, a more stable political environment - are all indicators of good growth to be achieved. Attracted by these factors, money is flowing into the region. The promoters expect business fundamentals to be strong, driving up stock values over the medium to long term in this positive environment.

"Kuwait Stock Exchange, along with most GCC stock markets, produced stellar performances last year. Our intention is to facilitate Gulf and global investors with means to diversify their exposure across the GCC markets and Iraq through a single efficient vehicle," said Mr. Abdulwahab Al Nakib.

"The IFA Khaleeji Fund begins operations from today," declared Mr. Saleh Al Silmi, IFA Group Vice-chairman & General Manager.

The Fund's offer period at a price US $100 per unit continues until close of business on March 31st 2004, after which units will be bought and sold at net asset value. Minimum subscription is set at US $500,000, clearly indicating that the Fund is not a retail offering and is targeted solely at the institutional and high net worth investor. After the offer period, investors can buy into the Fund twice a month at NAV, while redemptions will be once every quarter. NAV will be calculated and published every fortnight. The Fund is open-ended.

Mr. Saleh Al Silmi pointed out that for the IFA Group, the Fund has brought a further element to its investment strategy adding a regional investment vehicle to balance its property and real estate development activities.

Fund Mechanics
The open-ended IFA Khaleeji Fund is registered in the Cayman Islands, which not only provides tax domicile advantages to investors, but also has an international-standard regulatory environment.

The Fund aims to pay dividends of up to half the realised gains every quarter. Investors, who do not wish to receive their dividends, have the ability to automatically reinvest such dividends back into the Fund at prevailing NAV rates.

The Fund is managed through an investment committee that implements strategy and allocates funds under pre-defined and measurable goals for each of the seven markets. It will have the flexibility to alter course quickly as dictated by subtle indications of change in each market.

Performance-driven fund managers on the ground in each of the seven individual markets do the actual running of operations as their own market best dictates.

"Our country managers, being experts in their individual market, have the best view from inside the market. That is why they will take decisions on the ground in a prompt manner," explained Mr. Abdulwahab Al Nakib.

After the initial offer period, The Fund's first NAV is likely to be announced in early April 2004.