(MENAFN- The Peninsula) By Satish Kanady / The Peninsula
As markets tend to offer investors a mixed bag of outcomes, Qatar's leading investment group QINVEST is bullish on Turkey, Europe and the US. It's also betting on Emerging Market equities.
QINVEST is cautious about the impact of the current macroeconomic environment. The investment group sees potential headwinds arising from the impact of a delayed FOMC monetary tightening policy and believes the ECB's removal of Quantitative Easing could expose the Eurozone periphery to a sell-off, reducing liquidity in EM credit markets. It also sees an increase in profit-taking in equities and credit, as the opportunity cost of money-market investments declines post rate hikes.
'There are additional concerns from increasing geopolitical risks both within the region here as well as arising from an increasingly confrontational tone between the US and its allies and North Korea. However, despite the market sentiment, we continue to identify pockets of investment opportunity within key sectors and geographies. Our approach can be summarised as being cautiously optimistic, Dr Ataf Ahmed, Head of Asset Management, QINVEST told The Peninsula in an extensive interview.
Explaining on QINVEST's exposure to EMs Dr Ataf said: 'Our primary exposure to Emerging Markets comes through in-house managed portfolios which focus on this region. These portfolios have exposure to both equities and sukuk. We also have exposure through QInvestPortfoy, which manages Turkish Equities and Sukuk for a number of institutional investors. There is also exposure to broader EM within some of our global funds and mandates, however this is minimal and represents approximately 10 percent of total assets across all funds.
On the potential impact of liquidity crunch on GCC's deal making, he said ‘liquidity crunch is something that comes and goes'.
While the current market environment across the globe is challenging, financial institutions in the GCC region are in a very strong financial position to international players. Liquidity in the GCC has been undoubtedly tightened as a result of the pressures on the oil price, there is also opportunity as we see the rise of growth industries which require innovative finance solutions and institutions look outside of traditional assets and funds for investment.
'We are seeing GCC nations reinforcing their plans to diversify the economies moving into sectors like finance, trade and tourism. The biggest impact in the region has been the tightening of government spending and introduction of initiatives to compensate for lower oil prices such as the removal of subsidies and introduction of VAT.
In certain sectors, QINVEST is also seeing consolidation to create bigger and stronger organisations, while issuances in both bonds and sukuk have been more prevalent. Qatar for example continues to have a significant surplus from both a fiscal and current account standpoint, and as we see some of the infrastructure projects near completion the spending demands on these projects will also fall, only serving to boost the government surplus.
Given the forecasted increase in the government's surplus, QINVEST believes it will see the government focus on the next stage in Qatar's economic growth. This view has only been solidified post-blockade, as the government is likely to follow through with support for the development of local businesses and a focus on self-reliance.
Commenting on the secular trend and the potential catalysts of change that QINVEST is seeing in the long-term horizon Dr Ataf noted: 'The end of Quantitative Easing in Europe and the US will be a catalyst for change, as we see central bank balance sheets shrink, we will truly find out if recent growth can be sustained by true economic activity rather than by abundant liquidity.
'We will also see if de-regulation and tax reform in the US can sustain the longest bull run in recent times, however it seems that there are challenges that were unforeseen within the current US administration, and the realms of what was thought to be possible has changed over the past few months.
On QINVEST's positioning in the current context of generally high-valued asset prices and the bank's secular outlook Dr Ataf said : 'Within equities we continue to have exposure to developed markets, although we have used Sharia'a compliant hedging contracts to de-risk our portfolios in the event of a sell off. We think that the US may see a one-off catalyst if the promised corporate tax cut materializes. Within Europe we have some exposure, however we think there are long term structural challenges which have not been resolved, so in terms of exposure we have some opportunistic exposure.
QINVEST is focusing on niche markets and opportunities which are non-correlated to traditional asset classes. Earlier this year, it launched the oversubscribed QInvest SQN Income Fund, a Sharia'a compliant closed-ended fund providing a unique opportunity for investors to access income generating assets in developed markets. The fund was launched in collaboration with SQN Capital Management, a leader within the global equipment leasing industry.
'We launched our first fund which invests into sharia compliant global leases (Ijarah) and has deployed a significant part of its assets which have started to distribute a yield equivalent to 7 percent per annum on a monthly basis. The fund is on target to generate an 8-9 percent IRR for its investors by the end of its investment term. We think that lack of correlation and the lack of capital within this asset class produces attractive risk adjusted returns. Making such products funds accessible and understood, is a priority for us, and we will continue to create innovative Sharia'a compliant products and services which meet our clients' needs and risk appetite.
Sharing his thoughts on ‘whether the ongoing geopolitical tensions are going to shake up the market?', Dr Ataf said the market has seen heightened tensions and geopolitical shocks on the global stage over the last 12 months, the effects of which continue to dominate the macroeconomic environment. However, investors have remained sanguine, and equity markets, particularly in the US, have been resilient to diplomatic strains demonstrating robust performance in recent years.
Asked ‘where does he want Qatari investors to put their money ?' Dr Ataf commented: 'It obviously depends on their risk appetite and liquidity needs. At QInvest, we have increasingly seen growing demand from investors for innovative Islamic products. To meet this, we have expanded our pioneering open architecture, Sharia'a compliant fund platform, QMAP, adding new, highly innovative products and widening the investment opportunities which we can present to our clients. The QMAP platform allows us to offer a range of products across different asset classes and markets and there are varying levels of return and yields.
'So far in 2017, our best performing funds are our global equity funds which have had an impressive return but we found that low risk, yielding products have been attractive to many investors. We had this yield sentiment in mind while developing our QInvest SQN Income Fund programme this has a 7 percent annual yield with a monthly pay out and as the first fund sold out within a few weeks of launch, we are already working on the next fund. However, as this fund programme has a five-year fixed term, other investors prefer higher liquidity and so we continue to raise assets for our sukuk strategy.
In 2016, QInvest's funds performed well despite a challenging and volatile market environment. 'Our Asset Management business has had a similarly strong first half to 2017,delivering impressive performance across both local and global markets withresults that place QInvestas a leader amongst its peer group. Within Turkey, a key growth market for QInvest, the team continues to deliver top quartile performance and has won a number of significant institutional mandates.
'We have a strong track record in managing Sharia'a compliant funds via our QInvest Managed Account Platform ('QMAP), the world's first open architecture Sharia'a compliant managed account platform. It brings best practice from the conventional fund industry to investors through a range of global partnerships with managers around the world. These achievements have been recognized through several awards, including 'Qatar - Asset Management Advisory Firm of the Year and 'Best Open-ended Sharia'a Securities Fund for the 'QInvest-GAM Sharia'a Fund.
MENAFN2809201700630000ID1095904694
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.