ING IM Dubai builds investment team
The fund house is preparing to launch an Arabian markets equity fund in September, to be managed by CIO Farah Foustok and her team. It is targetting a total AUM of $1 billion for the whole firm by June 2009.
ING Investment Management Dubai, which officially opened its doors last month, is busy building its business in the Middle East and North Africa (Mena) region. High on the agenda is putting together an investment team, manufacturing products and looking out for investment opportunities.
Grant Bailey is the CEO of ING IM Dubai, while Farah Foustok is CIO. Bailey, who moved to Dubai in October last year to help set up the Mena operations, was previously the CEO of ING IM Australia.
Foustok, who joined ING IM Dubai in May, has been building its investment team, which she heads. So far, the firm has an equities team of six led by Fadi Al Said; another analyst is expected to join the team shortly.
A head of fixed income has also been hired, but his name canÆt be revealed yet as he is in between jobs and will be coming on board in September. He is expected to be joined by three other fixed-income specialists.
An alternatives team of six is expected to round off the whole investment team. So far, no one has been hired for this group.
ôThe idea is to build the equities and fixed income team and products before we launch alternative assets,ö says Foustok. ôWhat we hear from the distribution side is the demand is much more for equities and fixed income and thatÆs where our expertise is so far.ö
ING IM has been building model portfolios, and has already taken in a sub-advisory mandate from an institutional client within one month of opening shop. Foustok says the fund house is targeting a total AUM of $1 billion for the whole firm by June 2009.
In the works is an Arabian markets equities fund, which ING IM Dubai plans to launch in September. The team is in the process of structuring that fund, which is expected to give investors access to 13 markets in the Mena region. The fund is undergoing documentation and will probably fall under an existing ING IM umbrella and will be a Ucits III, Sicav fund domiciled in Luxembourg.
The fund will not be benchmarked against any index because the goal is to deliver absolute returns. Foustok notes that the MSCI Arabia Index, which is among the key benchmarks used by Mena funds, wonÆt be a good guidepost for ING IM DubaiÆs fund because Saudi Arabia makes up around 48% of that index.
ôSince we are bottom-up fundamental investors, we donÆt believe that we should be benchmarking to an index that has such a high allocation to one market,ö she says.
Foustok expects the majority of the demand for the fund to come from investors outside the Middle East. ôSeptember is in fact a quiet month in the Middle East because itÆs Ramadan, so we will be marketing the fund in Asia and Europe,ö she says.
ING IN Dubai plans to focus on the Arabian equities fund launch before embarking on others.
ôBecause of our strong institution networks through ING, we will launch products with the backing of demand,ö says Foustok. ô If in four or five months from now we find that there is demand for a Middle East enhanced tracker, for example, people who want to capture the beta of the market, we will create a tracker.ö
The Mena story is fast gaining widespread attention, especially among investors looking for alpha during these volatile times.
There are 13 stock exchanges in the Mena market, including three in the UAE (Dubai, Abu Dhabi, and the Dubai International Financial Exchange). There are around 1,500 stocks listed in the Mena markets, with a compounded market capitalisation of around $1.5 trillion. Saudi Arabia makes up around half of the market cap of the Mena markets, followed by the UAE and Kuwait. Sector-wise, financials (banks and insurance), real estate (developers, construction companies, and contractors) and chemicals (oil and gas, petrochemicals, and oil derivatives companies) are among the largest.
Performance-wise, all markets have posted returns year-to-date except for Egypt and Saudi Arabia.
ôThe best strategy to manage money out of this region is using the bottom-up approach,ö says Yazan Abdeen, an equities fund manager at ING IM Dubai. ôWhat is important is understanding the underlying stories of the companies, analysing financial statements, meeting management and understanding their strategies.ö
It would be easy to passively invest in an index or a benchmarked fund when markets are rising, but that strategy will falter when economic growth slows and inflation pressures emerge, Abdeen says.
While ING IN Dubai is a very new operation, its investment team has several years of experience managing money in the region.
Foustok was head of asset management at NBD Investment Bank (a wholly owned unit of the National Bank of Dubai), where she worked from late 2006 to early 2008. At NBD, she managed a team of 10 professionals and around $2 billion in assets. In total, she has 14 years investment experience, mostly in the UK and Spain. Before NBD, she was a senior fund manager at EFG-Hermes, where she was responsible for managing GCC and Mena funds. She also worked within the equity strategy teams at Deutsche Bank and Morgan Stanley in London.
Foustok, Al Said, and Walid Mourad (an equities analyst at ING IM Dubai) previously worked together at NBD.
Abdeen has more than five years experience analysing and valuing companies in the Mena region. In his previous role at a Dubai-based real-estate developer, he helped to set-up an investment division and was responsible for managing the proprietary public equity portfolio investing in the GCC capital markets. Prior to that, he was a vice-president of asset management at Noor Capital in Abu Dhabi, where he was responsible for the structuring and co-managing of the Mena Opportunity fund and proprietary portfolios. He also co-managed a $1 billion Mena public equity portfolio at Damac Investments.
Foustok considers the backing of ING, being the first global financial institution to set-up an asset management team in Dubai, as one of ING IM DubaiÆs advantages over the competition.
ôWe have the risk models that ING uses. We are governed by ING compliance in the head office in Hong Kong. I think thatÆs a huge advantage because what the region lacks is professionalism and processes and systems that are not in place,ö she says.
ôMost of the investment team in the Middle East donÆt have pre-trade compliance, they only have post-trade compliance. Some of them will say thatÆs not really important because they can just adjust the portfolios when they find that there is an error. We believe that (the discipline and processes) are important because if we are going to bring international standards into the market then we should be up to international standards from the beginning.ö
When looking at companies, ING IM Dubai looks at the relationship between three things: profitability and growth, and the relationship of those two to valuations.
ôWe try to look for stocks with either a medium market cap or liquidity that have not been covered by the majority of sell-side houses because they cannot generate fees from them,ö Abdeen says. ôWe look at the underlying story, we analyse the quality of the returns, the cleanness of the particular assets, growth assumptions. We compare the fair value to the market mood that we get on a daily basis and we decide our entry points and our exit points accordingly.ö
Grant Bailey is the CEO of ING IM Dubai, while Farah Foustok is CIO. Bailey, who moved to Dubai in October last year to help set up the Mena operations, was previously the CEO of ING IM Australia.
Foustok, who joined ING IM Dubai in May, has been building its investment team, which she heads. So far, the firm has an equities team of six led by Fadi Al Said; another analyst is expected to join the team shortly.
A head of fixed income has also been hired, but his name canÆt be revealed yet as he is in between jobs and will be coming on board in September. He is expected to be joined by three other fixed-income specialists.
An alternatives team of six is expected to round off the whole investment team. So far, no one has been hired for this group.
ôThe idea is to build the equities and fixed income team and products before we launch alternative assets,ö says Foustok. ôWhat we hear from the distribution side is the demand is much more for equities and fixed income and thatÆs where our expertise is so far.ö
ING IM has been building model portfolios, and has already taken in a sub-advisory mandate from an institutional client within one month of opening shop. Foustok says the fund house is targeting a total AUM of $1 billion for the whole firm by June 2009.
In the works is an Arabian markets equities fund, which ING IM Dubai plans to launch in September. The team is in the process of structuring that fund, which is expected to give investors access to 13 markets in the Mena region. The fund is undergoing documentation and will probably fall under an existing ING IM umbrella and will be a Ucits III, Sicav fund domiciled in Luxembourg.
The fund will not be benchmarked against any index because the goal is to deliver absolute returns. Foustok notes that the MSCI Arabia Index, which is among the key benchmarks used by Mena funds, wonÆt be a good guidepost for ING IM DubaiÆs fund because Saudi Arabia makes up around 48% of that index.
ôSince we are bottom-up fundamental investors, we donÆt believe that we should be benchmarking to an index that has such a high allocation to one market,ö she says.
Foustok expects the majority of the demand for the fund to come from investors outside the Middle East. ôSeptember is in fact a quiet month in the Middle East because itÆs Ramadan, so we will be marketing the fund in Asia and Europe,ö she says.
ING IN Dubai plans to focus on the Arabian equities fund launch before embarking on others.
ôBecause of our strong institution networks through ING, we will launch products with the backing of demand,ö says Foustok. ô If in four or five months from now we find that there is demand for a Middle East enhanced tracker, for example, people who want to capture the beta of the market, we will create a tracker.ö
The Mena story is fast gaining widespread attention, especially among investors looking for alpha during these volatile times.
There are 13 stock exchanges in the Mena market, including three in the UAE (Dubai, Abu Dhabi, and the Dubai International Financial Exchange). There are around 1,500 stocks listed in the Mena markets, with a compounded market capitalisation of around $1.5 trillion. Saudi Arabia makes up around half of the market cap of the Mena markets, followed by the UAE and Kuwait. Sector-wise, financials (banks and insurance), real estate (developers, construction companies, and contractors) and chemicals (oil and gas, petrochemicals, and oil derivatives companies) are among the largest.
Performance-wise, all markets have posted returns year-to-date except for Egypt and Saudi Arabia.
ôThe best strategy to manage money out of this region is using the bottom-up approach,ö says Yazan Abdeen, an equities fund manager at ING IM Dubai. ôWhat is important is understanding the underlying stories of the companies, analysing financial statements, meeting management and understanding their strategies.ö
It would be easy to passively invest in an index or a benchmarked fund when markets are rising, but that strategy will falter when economic growth slows and inflation pressures emerge, Abdeen says.
While ING IN Dubai is a very new operation, its investment team has several years of experience managing money in the region.
Foustok was head of asset management at NBD Investment Bank (a wholly owned unit of the National Bank of Dubai), where she worked from late 2006 to early 2008. At NBD, she managed a team of 10 professionals and around $2 billion in assets. In total, she has 14 years investment experience, mostly in the UK and Spain. Before NBD, she was a senior fund manager at EFG-Hermes, where she was responsible for managing GCC and Mena funds. She also worked within the equity strategy teams at Deutsche Bank and Morgan Stanley in London.
Foustok, Al Said, and Walid Mourad (an equities analyst at ING IM Dubai) previously worked together at NBD.
Abdeen has more than five years experience analysing and valuing companies in the Mena region. In his previous role at a Dubai-based real-estate developer, he helped to set-up an investment division and was responsible for managing the proprietary public equity portfolio investing in the GCC capital markets. Prior to that, he was a vice-president of asset management at Noor Capital in Abu Dhabi, where he was responsible for the structuring and co-managing of the Mena Opportunity fund and proprietary portfolios. He also co-managed a $1 billion Mena public equity portfolio at Damac Investments.
Foustok considers the backing of ING, being the first global financial institution to set-up an asset management team in Dubai, as one of ING IM DubaiÆs advantages over the competition.
ôWe have the risk models that ING uses. We are governed by ING compliance in the head office in Hong Kong. I think thatÆs a huge advantage because what the region lacks is professionalism and processes and systems that are not in place,ö she says.
ôMost of the investment team in the Middle East donÆt have pre-trade compliance, they only have post-trade compliance. Some of them will say thatÆs not really important because they can just adjust the portfolios when they find that there is an error. We believe that (the discipline and processes) are important because if we are going to bring international standards into the market then we should be up to international standards from the beginning.ö
When looking at companies, ING IM Dubai looks at the relationship between three things: profitability and growth, and the relationship of those two to valuations.
ôWe try to look for stocks with either a medium market cap or liquidity that have not been covered by the majority of sell-side houses because they cannot generate fees from them,ö Abdeen says. ôWe look at the underlying story, we analyse the quality of the returns, the cleanness of the particular assets, growth assumptions. We compare the fair value to the market mood that we get on a daily basis and we decide our entry points and our exit points accordingly.ö
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