Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
EFG Hermes, a financial group based in Cairo and Dubai, will offer its products on a white-label basis to distribution banks in Japan, Korea and Singapore as soon as March, says Hashem Montasser, managing director for asset management in Dubai.
EFG Hermes, a public company created in 1984, is a regional firm with businesses spanning asset management, private equity, brokerage, investment banking and sell-side research. It manages around $7.5 billion of third-party assets, of which around $6 billion is invested in public securities.
Asset management is a relatively new focus for the group. Although its capability dates to the 1990s, and it launched its first Mena long-only fund in 1999, the business only took off in the past two years. It hired Montasser from JPMorgan in London in 2005 to drive the business. Since then, the long-only Mena fundÆs AUM has grown from $50 million to almost $1 billion, making it the largest mutual fund indigenous to the Middle East. It also has a long/short Mena equity fund co-managed with Harvard Management, covering both public and private securities.
(Montasser and his team drive the asset management business outside of Egypt; the Cairo office is run by Maha Baligh. There is also a small office in Riyadh and a new office in Doha.)
An impetus to this growth has been new interest among institutional investors outside the Middle East. Two years ago, EFG Hermes attracted mandates from investors in the United States and Europe. Investors from outside the region comprise over 50% of asset gathering, Montasser says.
Now, however, it sees Asia as the most likely region from which to source new business. The firm has no immediate plans to launch a retail offering in Europe or America. Montasser says the profile of Asia retail investors is similar to those in the Middle East, usually seeking high-return products that are considered too risky by mainstream retail investors in the West.
Moreover, as stockmarkets in the Gulf evolve at a breakneck pace, they are following in the footsteps of Asian emerging markets more than the more stately development of markets in America or Europe. ôThe volatility is similar to markets in Asia ex-Japan,ö Montasser explains.
He sees investors and industries in the Gulf looking more to Asia, and not just to those Southeast Asian markets associated with Islamic investments û and he sees investment flows beginning to come to the Middle East from Asia. At this stage, the most have come from the more developed markets such as Hong Kong and Singapore, where investors are more mature and looking to diversify. Along with Korea and Japan, these are also the wealthiest markets in East Asia, and therefore the most obvious place to start.
Montasser declined to name the banks with which EFG Hermes is planning products, but suggests the firm will do a roadshow to Asia next month, at which point the tie-ups will be announced. But in all three cases, EFG Hermes will sub-advise products for these banks, as it doesnÆt have a brand name that investors in Asia would recognise.
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