Mutual Matters

US investment house and DIFC licensee, Franklin Templeton, hopes to repeat the mutual funds success it enjoyed in India in the Middle East.

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By  Mark Johnson Published  April 4, 2005

|~||~||~|No stranger to foreign lands, Franklin Templeton Investment Management views itself as a bit of a pioneer, reaching out to far off, under-developed parts of the world and setting up operations ahead of its competitors. It has a strong pedigree in emerging markets — having introduced mutual funds to the mass market in India, where it is now the second largest asset management company and the largest private asset management firm. It’s hoping to repeat that success here. As one of the first group of foreign companies to be granted a licence to operate within the Dubai International Financial Centre (DIFC), it’s clearly pulled off another first ahead of much of the competition — a key factor in its bid for success across the region — and it is excited about the prospects that lie ahead. The investment firm’s Dubai office will serve its existing and new clients across the Gulf region, but, interestingly, it will also act as a hub to serve its clients in Eastern Mediterranean countries, such as Cyprus, Egypt and Turkey, as well as some Eastern European nations such as the Czech Republic and Hungary. Harshendu Bindal is Franklin Templeton’s director of sales and business development and heads up the firm’s Dubai office. He says a key driving force for the company setting up in the DIFC was the regulatory framework: “The DIFC regulatory system was the clincher for Dubai, because one of its pillars of focus is asset management,” he explains. “But beyond that, regulation across the region is coming more into line with what we are comfortable with. If you look at Eastern Europe and the countries that have joined the European Union, their regulation is coming into line. Similarly, in the eastern Mediterranean — places such as Cyprus and Greece — regulation is also coming up to scratch. Places like Dubai are helping to improve the wider regulatory environment dramatically and that will really help to improve our business.” Franklin Templeton’s global business model is based around partnering with banks, broking houses and independent financial advisors, to whom they provide high quality services and funds. Key international distributors in the Middle East region include the likes of Citibank, ABN Amro Bank, Standard Chartered and Merrill Lynch. However, the company also recognises the huge value to be gained from forming similar partnerships with local and regional finance houses, too. “The local banks are really the prime distribution network in any country, as they have the customer reach, and are the ones who really drive the business and help to develop the market,” says Bindal. Moreover, many of the local and regional banks are getting into investment advisory and distribution of financial products: “This will result in more and more people looking at mutual funds, which, previously, very few banks offered” Bindal says. “Unlike the developed markets there hasn’t been strong distribution in this region. And although that is now changing, signing up the banks, providing training and so on means there is still a lot of hard work ahead,” he adds. So far, though, Franklin Templeton has already tied up with the likes of Mashreqbank, and Abu Dhabi Commercial Bank (ADCB), in the UAE; Bank of Bahrain and Kuwait in Bahrain; and Bank Muscat in Oman. Expect more names and countries to be added to this list over time. In the Gulf region, the company’s main focus is on solutions for high net worth individuals (HNWIs), whereas in Cyprus, Egypt and Turkey the target is typically the middle-income group. “The product choice depends on the country,” Bindal says. “In the Gulf, we offer an offshore range of about 40 funds domiciled in Luxembourg, and we also offer another five alternative strategy funds.” On the subject of locally inspired funds, he confirms the company is in talks with its distribution partners to see if, together, they can develop some locally domiciled funds, particularly for the UAE, Turkey and other MENA markets. “Our emerging market teams cover this region, but what we haven’t done until now is come out with a fund that is purely focused on the region,” Bindal says. “However, our distributors say there is now a real appetite among customers for funds primarily investing in this region.”||**||

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