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March 14, 2006
Middle East investors develope huge appetite for hedge funds
The appetite among Middle East investors for hedge fund products, especially among institutional investors, is on the increase, according to a hedge fund industry expert. The past 20 years have seen enormous changes in the global hedge fund industry, with rapid asset growth from about $38 billion in 1990 to over $1.1 trillion today, Antoine Massad, chief executive officer of Man Investments Middle East Ltd., the asset management arm of Man Group PLC, told the 7th Hedge Fund World Middle East 2006 conference held here last week.
"At this point, the alternative industry has made the transition from a niche investment area to become a mainstay of the asset management industry," he said. Emphasizing that the company has a long association with this event and indeed with the region, Massad said this year was a very special one for Man Investments in the region. "Not only are we celebrating our 20th anniversary in the Middle East, but we have also just opened our fully-owned subsidiary, Man Investments Middle East Ltd., at the Dubai International Financial Center (DIFC). Events like these help us to reach out to investors and explain the current and future shape of the industry," he added.
Established in 1983, Man, a leading global provider of alternative investment products and solutions as well as one of the world's largest futures brokers, has launched more than 450 products, many of them with leading financial institutions. It employs over 1,100 people worldwide. Man manages $45.8 billion assets, some 10 percent of which come from the Middle East.
Man has key centers in Switzerland and London and it has offices in Chicago, Hong Kong, the Middle East, Montevideo, New York and Tokyo.
Massad said investments by private clients from the region in hedge funds had slowed in 2005, as booming local markets lured investors. Institutional investments, however, remained stable. He said acceptance of the hedge fund industry, which uses leveraged buying, futures and options, short selling and index products, had grown in the past 10 years and regional institutions were increasingly investing in hedge funds.
Assets under management at Man have grown by 20-25 percent annually over the past five years, Massad said.
"The next five years will bring greater regulation, consolidation, standardization of IT and reporting, and increasing regionalization of products. Hedge fund providers will have to adapt to this new environment and only those who have the capacity to invest in research and product development and in exploring new markets and opportunities will survive this transformation," he added.
"The shift in investor demand and the emergence of new strategies that require in-depth research and industry participation is creating broad economies of scale in the global hedge fund industry. In the coming years, this will drive consolidation, creating larger, international investment houses that provide a higher level of service, transparency and investor choice. Further developments and enhancements within regional financial centers could only result in a range of new hedge fund products trading in Arab markets," Massad said.
"The past year has been an important one for the hedge fund industry in the Middle East, particularly with the emergence of a new international financial center in the region. The DIFC appears to be a crucial step toward the creation of locally-focused funds, while the continued institutionalization of the industry has brought it into the mainstream of asset management," Massad said.
The growth rate of hedge funds varied between 20-25 percent over the past five years and should level out and hold at about 15 percent till 2011, Man Group Chief Executive Officer Stanley Fink told the conference, which attracted over 600 investors and financial services experts.
Commenting on the growth areas for hedge funds, Fink said good returns were to be seen in the emerging markets, which are the biggest growers, utilizing a macro strategy. Although there will always be moments in time when local stock markets offer a host "hot" options which provide instant returns, the long-term prospects of hedge funds remain good, offering a stable and continued 18-20 percent profit.
DIFC Chief Executive David Knott said that DIFC was in the final stages of establishing a regulatory framework for collective investment funds (CIF).
He also urged all participants to consider opportunities for funds management within the DIFC under a regulatory regime that will be highly credible but also commercially balanced.
A collective investment fund is a shared fund which allows investors to participate in a wider range of investments than may be feasible for an individual investor and to share the costs.
The key policy considerations when establishing domestic funds — funds that are established or domiciled within the DIFC — are that they are badged as DIFC funds and adhere to its core principles of integrity, transparency and efficiency. He said that domestic funds must be readily accepted for international passport purposes, which means that regulatory approach is recognizable to international regulators and adheres to the core principles laid down by the International Organization of Securities Commission (IOSCO).
-Arab News-
Posted by su at March 14, 2006 9:40 AM