Franklin Templeton acquires 25% stake in Algebra

The Dubai deal gives Franklin Templeton ownership in the Middle East's first independent asset management company.
Franklin Templeton has acquired a 25% stake in Dubai-based Algebra Capital for an undisclosed amount. Beyond the various advantages this will provide both firms, the deal marks a landmark for the Middle East.

"This puts the region's asset-management industry on the map and confers it a degree of legitimacy it hasn't had before," says Daniel Smaller, managing director and head of sales and distribution at Algebra.

Algebra was founded last year by partners with experience in Dubai and the Middle East's young financial services industry. Its CEO, Ziad Makkawi, is a Lebanese who had been a partner at Shuaa Capital, one of the Gulf region's leading homegrown financial providers.

Shuaa does investment banking, advisory, broking and other services in addition to asset management. It now manages around $850 million for its asset maangement business. The concept behind Algebra was to become the region's first independent, dedicated asset manager.

Last week it signed one of its first mandates, sub-advising a Mena (Middle East and North Africa) fund for Schroder Investment Management that will be targeted at Asian investors.

Its partners have experience in GCC and Middle East equity and fixed income, and also hope to develop a business in regional private equity. It will introduce its first Mena equity mutual fund in a few weeks, says Mohieddine ("Dino") Kronfol, managing director of asset management.

Kronfol explains the firm saw success as requiring, among other factors, institutional credibility and the ability to retain talent. The Franklin Templeton deal is meant to provide this. Franklin Templeton will also help Algrebra with international distribution. Algebra also hopes to bring distribution up to international standards, which is why it had hired Dan Smaller, who previously headed the region for Deutsche Asset Management.

For Franklin Templeton, this deal fulfills an ambition to provide on-the-ground investment expertise and product development capability. Many global fund houses are building businesses in Dubai, Bahrain, Qatar and other centres in the Gulf. But so far none have dedicated Middle East investment teams, and most tend to include the region in their global equity portfolios.

"With this deal, we have stepped up our presence in the region," says Harshendu Bindal, senior director at Franklin Templeton in Dubai, who oversees a region including the Eastern Mediterranean. "Now we can offer regional asset classes to investors both locally and around the world."

He notes that Gulf investors used to be either ultra-wealthy families and the well known state investment companies, or expats, all of whom wanted global or US and European exposure. Today that has changed and there is growing demand for GCC or Middle East assets, not just from these investors but also from the growing ranks of the GCC's emerging middle class and smaller institutional investors. So to appeal to the growing local clientele will require having local investment expertise as well as global products, he says.

For a deeper look at asset management in the Gulf, see the October edition of AsianInvestor magazine.
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