Financial giants tackle Gulf’s FDI problem

Three major Gulf finance companies have created a GCC and Iraq fund that will be targeted at international institutional investors.

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By  David Ingham Published  March 3, 2004

Three major Gulf finance companies have joined forces in an effort to bring more foreign direct investment into the region. International Financial Advisors (IFA), Univest Group and Daman Asset Management have created a mutual fund called the IFA Khaleeji Fund, which will invest in Gulf equities and in Iraqi companies. The target market for the fund is international institutional investors seeking emerging market opportunities. “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. The fund’s promoters are launching it with a seed capital of US $10 million. Minimum subscription is set at US $500,000. Redemptions will be made at the end of each quarter and the fund is open ended. Whilst the product may be positioned as an emerging market fund and targeted at overseas investors, it remains to be seen whether they will buy into it. In an effort to boost investor confidence, the fund says it will follow a strict due diligence regime, will publish its net asset value in the Financial Times newspaper and will have a strong seven member board. One of those members is Christopher D. Brady of USA-based investment bank, The Chart Group, who has reportedly invested several hundred million dollars 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 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.” The Middle East’s inability to pull in foreign investment is well documented. It attracts, in an average year, less than 1% of all global foreign direct investment (FDI.) “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,” said Shehab Gargash, managing director of Daman Asset Management. “We created the IFA Khaleeji Fund to pull money into the region’s equity markets by acting as a channel for potential global investors.”

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