KSA funds continue to rule the roost in size and performance

18 November 2012
At the end of the third quarter of 2012, total assets under management amounted to USD 59.5 billion, according to the first issue of Zawya's MENA mutual funds quarterly bulletin for Q3-2012.

More than half of these assets are invested in money market and Saudi trade finance funds, while 25% is invested in equities. The rest is allocated among fixed income securities, IPOs, protected or guaranteed funds, and many other types.

However, if we look at the distribution in terms of number of funds, the proportions vary to 40% in equities, 19% in fixed income and sukuk, and 14% in money market and Saudi trade finance.

The bulletin reveals that Saudi Arabia continues to be the largest fund domicile holding almost 40% of the region's total AUM, with 227 funds worth USD 23.28 billion. Ring-fenced from the Arab Spring turmoil, and one of the wealthiest nations in the region, Saudi Arabia managed to attract 32% or USD 19.23 billion of MENA AMC's AUMs, and it captured USD 222 million in net inflows during this quarter. Also, Islamic money market funds, of which Saudi Arabia trade finance funds constitute the biggest share, recorded a net inflow of USD 322 million.

Saudi focused trade finance funds were also ahead of the market in performance, gaining an average of 0.22% from last quarter compared to a negative 0.59% registered by the MENA Islamic money market sector. Al Ahli US Dollar Sukuk and Murabaha Fund ranked first in the latter category with a quarterly return of 0.91%. Managed by NCB Capital, the fund is domiciled in Saudi Arabia and invests half of its assets in Murabaha trades within the GCC.

According to Zawya Funds Monitor data, three of the five largest AMCs are based in Saudi Arabia, the first being NCB Capital with a total AUM of USD 7.46 billion. Third and fourth are Samba Capital and Riyad Capital, managing USD 4.04 billion and USD 3.52 billion, respectively. The second and the fifth positions go to the Egyptian Beltone Asset Management and the Moroccan BMCE Capital Gestion.

Helped by a massive economy, a large fund domicile and focus, Saudi Arabia is still under evaluation by the MSCI to be included in the frontier or emerging markets category. The only impediment is the level of market accessibility to international investors.

While Saudi Arabia is waiting for an upgrade, Morocco has been placed on review for a potential downgrade to frontier market. According to the bulletin, Morocco is ranked as the second largest fund domicile, regulated by the Moroccan Trust Companies and Investment Funds Association (Asfim), and has 174 funds managing USD 13.03 billion. During the past two years, the Moroccan economy has shown signs of a slowdown, mirroring the European crisis and illustrating the kingdom's dependence on European investors and tourists. The Casablanca bourse ended September 2012 with negative YTD returns of 14.11% and the Moroccan mutual funds registered the largest net outflow of USD 925 million for the second and third quarters of 2012.

The other side of the African continent registered positive performance as the Cairo stock exchange returned 58% from the beginning of the year. As a result of increasing political stability, the USD 10 billion Egyptian mutual fund industry recorded the largest fund inflow of USD 613 million and marked a confident presence among the top performers of this quarter.

In the conventional equity sector, EFG-Hermes Egypt Fund outperformed its peers and achieved a quarterly return of 23.72%, compared to the average market return of 3.95%. In the Islamic equity segment, Naeem Misr Fund ranked first as it realized a quarterly return of 25.85%, more than triple the return registered by the sector. Also, the bulletin shows the conventional money market sector was headed by the Egypt-based CIAM through its Blom Bank Money Market Fund returning 3.09% despite a remarkable net outflow of USD 220 million from this category.

Jordan has the smallest number and size of locally domiciled funds.  The MENA-focused Horizon Fund managed by Capital Bank of Jordan and the Jordan Securities Fund managed by the Housing Bank for Trade and Finance raise the size of the Jordanian mutual fund industry to USD 7.61 million.

The third quarter of 2012 witnessed the launch of six funds mainly from Morocco and Tunisia. Although the Islamic funds industry is expecting an inflow of USD 70 billion from GCC investors, only one Islamic fund was launched in this quarter.

In the midst of global uncertainty, the MENA region holds fundamental appeal for international investors; however, liquidity and foreign ownership restrictions have been the main concerns. MENA investment professionals are expected to consider innovative strategies aimed at capitalizing on this funds opportunity.

For further details, please refer to the MENA Mutual Funds Quarterly Bulletin (Q3-2012).

Nancy Mitri is Zawya's funds analyst and can be contacted at

© Zawya 2012


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