The Algebra alpha Mena fund from Dubai-based investment boutique Algebra Capital is held in New Star’s active, balanced, cautious, managed and tactical portfolios. Key sectors for the fund are financial services, construction, petrochemicals & fertilisers and logistics & transportation.
New Star’s multi-manager team sees the Mena region, which includes Saudi Arabia, Qatar and Oman, as a long-term opportunity due to factors such as good economic growth, infrastructure spending and expectations that the price of oil will remain strong.
Earnings’ growth for companies in the region is around 20 per cent this year and price/earnings ratios in the mid-teens mean that valuations are reasonably cheap compared with other emerging markets.
New Star says the Mena region has a low correlation to global equity markets and investors will reap the potential benefits of a revaluation of Middle East currency if the region depegs from the dollar.
Despite interest in the Mena region from UK fund firms that are starting to launch funds in this region, New Star is a firm believer in using specialist local managers. Its funds of funds have opened up access to the Algebra alpha Mena fund for UK investors who would not necessarily know about the fund and who would otherwise need to invest a substantial amount to meet minimum entry requirements.
Fund manager Rob Jeffree says: “When a region comes on to the radar, we try to invest with people who have been doing it for years, especially in periods when it has been out of fashion. For example, in Africa, we use Imara. Having local people on the ground is very important.”