Funds Hub

GCC fund firms face structural flaws: Lipper

By Dunny P. Moonesawmy, Head of Fund Research for Lipper in Western Europe, the Middle East and Africa. The views expressed are his own.

Spare a thought for the fund managers trying to make their business work in the Middle East and north Africa (MENA) this year.

Those investing in home markets have faced the uncertainty and drama of the Arab Spring and the wear and tear on affected markets. The Egyptian Stock Exchange was closed for several months while in the Gulf Cooperation Council (GCC) countries, all markets ended the first half in the red (even if the Abu Dhabi index and the Saudi Tadawul All Shares resisted well, down 0.57 percent and 0.67 percent respectively.)

Moreover, the fund industry in the region faces some deep structural flaws.

Taking the GCC alone, there are 101 fund management companies in the region managing $28.5 billion of assets between them, according to Lipper data. Those firms run a total of 337 funds with average assets under management at $84 million; taking a median figure to iron out the inflating effect of a few bigger funds that figure is just short of $20 million. To see a graphic showing AuM by asset class in the GCC, click here.

The six biggest funds in the region had cumulated assets of $10 billion and represented over a third of the market at the end of September. To see a graphic of the top funds, click here.

Arab spring dents MENA funds

By Merieme Boutayeb, Research Analyst at Lipper. The views expressed are her own.

The first half of 2011 has been a tough ride for investors. Disaster in Japan and the ongoing euro zone debt crisis have sent markets reeling, but perhaps the most telling long-term impact will come from the so-called Arab spring.

Funds investing in the Middle East and north Africa (MENA) have had some difficult calls to make as widespread protests threatened the old order. And the hardest task of all has been to protect client capital steadily built up during the preceding years.

At the end of 2010, there were 956 primary mutual funds domiciled in the MENA region, according to Lipper data. Some 41 percent were invested in equities and 24 percent in bonds while 19 percent were mixed asset funds invested in both equities and fixed income. The rest were either money market funds (13 percent), real estate funds or guaranteed/protected funds.

Total assets under management were 53 billion euros ($76.22 billion) at the end of 2010, up almost 33 percent from the end of 2009.

That’s more than double the growth seen by Europe-domiciled funds over the year, according to figures from industry association Efama, and is a good indication of how a small sector was starting to gain some traction with investors.

The longer-term picture, however, shows investment funds in MENA countries have struggled to grow and to reflect economic development, especially in the six countries of the Gulf Cooperation Council (GCC) which benefit from sustained growth and increased oil revenues. Trouble is, the predominance of sovereign wealth funds and pension funds means these giant institutions control the majority of assets.