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Barings prepares to launch delayed Mena fund

Baring Asset Management is preparing to launch its delayed Middle East and North Africa fund in the first quarter of next year.

The fund will be structured as a sub-fund of the Baring global investment umbrella fund, an Oeic domiciled in Ireland.

The launch was initially postponed in June 2008 because global markets were not performing well at the time.

Head of European, Middle Eastern and African equities Ghadir Abu Leil-Cooper will manage the fund, which is currently run as a paper portfolio. “We like the region because of its favourable demographics and economic underdevelopment,” she says.

The paper portfolio is overweight in Egypt, Qatar, Saudi Arabia and Turkey, although these positions may change prior to launch.

“We like to play infrastructure themes and domestic demand stories,” she says. Domestic demand companies could include banks, pharmaceuticals, and telecoms.

“We are looking for growth at a reasonable price,” she says. When selecting holdings, she looks for attractively valued companies that trade on a price/earnings ratio of 0.9 per cent to 1.2 per cent. 

She adds a recovering oil price will help the region, and long-term demand, especially from China and other emerging markets, will be supportive for the countries.

However, Abu Leil-Cooper says oil and gas revenues are not the only attractive investment opportunities.

Qatar, for example, has the highest GDP per head in the world owing to its status as the largest exporter of liquefied natural gas.

The manager says other areas such as financial services and tourism have experienced strong growth in recent years.

Egypt, for example, has seen a high level of investment from the Gulf countries into the banking, real estate, and telecoms sectors to meet increasing demand.

Governments have also made significant commitments to develop a “world-class infrastructure across the region” and are providing economic stimulus.

Abu Leil-Cooper aims to have at least 70 per cent of total assets in equities in the Mena region. She can invest up to 30 per cent outside the region. The fund will be benchmarked against the MSCI Arabian Markets ex Saudi Arabia index. Its investment universe includes Bahrain, Jordan, Kuwait, Oman, Qatar and the United Arab Emirates in the Middle East. The fund will also be able to invest in North Africa, including Egypt and Morocco.

Abu Leil-Cooper says markets in the region have historically been volatile, and liquidity remains low by comparison with developed markets. Political risk is another factor she takes into consideration when investing in the region.

However, Abu Leil-Cooper, who will be supported by four other members on the EMEA equity team, says Barings has many years of experience in investing in the region.

In October, HSBC Global Asset Management finally launched its Mena fund, originally scheduled for launch in October 2008. Like Barings, HSBC says the launch was postponed because of volatile market conditions.

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