Dubai hits target in wealth management ambitions

The bright lights of Dubai are attracting some of the biggest names in global finance. (Shutterstock)
Updated 09 September 2018
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Dubai hits target in wealth management ambitions

  • Dubai is fast becoming a global center for wealth management, according to new figures from the emirate’s financial hub.
  • Fidelity International, the Bermuda-based investment management group, announced it too was to set up in the DIFC

The Dubai International Financial Center on Sunday announced it had passed a landmark of 200 firms in the fast-growing wealth and asset management sector that had chosen to be based in the center, a rise of 6 percent from the halfway point last year. Some 13 of the top 25 firms in the wealth management sector are included in that total.

The number of financial funds under management by DIFC entities has leapt by 240 percent in the same period, from 25 to the latest figure of 60, making it the largest funds domicile in the region, the DIFC said. 

Arif Amiri, chief executive of DIFC, said: “The wealth and asset management sector is a cornerstone of a thriving financial services industry, and as the DIFC has developed into a top global financial center, it has become one of our hallmarks. Major financial institutions see Dubai and the DIFC as a preferred platform to access investment opportunities and sources of investment across regional and global markets.

“To date, the center has seen consistent and significant growth in this field, reflecting the industry’s ongoing confidence in Dubai and the DIFC. We expect to see this growth continue as we introduce new regulations to our attractive legislative and business environment in line with our ambitious 2024 Strategy. Our flexible structures, which also benefit private wealth management and family trusts, continue to give us the edge,” he added.

The DIFC is committed to a ten-year strategy of trebling in size by 2024 in terms of the number of member firms and employees as well as the value of assets under management.

In the first half of 2018, the DIFC attracted three of the biggest names in global finance, Chinese firm Everbright Group and American giants State Street Global Advisers and Berkshire Hathaway Specialty Insurance.

 

 Last month, Fidelity International, the Bermuda-based investment management group, announced it too was to set up in the DIFC.

“These companies benefit from three types of fund structures, as well as tried-and-tested special-purpose companies and insurance special-purpose vehicles, used in structured financing transactions or related to entities of substance. The DIFC’s international-standard regulatory framework and flexible business environment are already paying dividends to global and regional companies within the Center’s community,” the center said.

In total, the DIFC reported a 17 percent rise in new financial institutions registering in the first half of the year, bringing the total to 2,003 with a combined workforce of nearly 23,000.

That period coincided with the decline of Abraaj Capital, the private equity fund manager that has been at the heart of the DIFC since it opened in 2004, but which was ultimately owned by a Cayman Islands holding company.

Financial and legal experts believe there will be no significant damage to Dubai from the Abraaj affair. Habib Al Mulla, one of the UAE’s leading corporate lawyers, told Arab News recently: “I don’t believe Dubai’s reputation has been damaged. The DIFC entity is not involved. There are various Abraaj entities which are subject of different jurisdictions.”

Nigel Sillitoe, chief executive of market research group Insight Discovery, which specializes in wealth and asset management sectors, said: “In the past quarter our company has received more requests than ever to support asset management companies within the DIFC.

“The recent woes at Abraaj did make us think that business might slow down but so far we haven’t seen any impact.” 

The center enacted two new laws in March: The trust law, which provides an appropriate environment for the operation of trusts in the DIFC, and the foundations law, a new regime to provide greater certainty and flexibility for private wealth management and charitable institutions.

Decoder

FASTFACTS

FASTFACT

The DIFC reported a 17 percent rise in new financial institutions registering in the first half of the year, bringing the total to 2,003 with a combined workforce of nearly 23,000.


Egypt sees surge in share offerings, testing market

Updated 18 September 2018
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Egypt sees surge in share offerings, testing market

  • Public share sales first in more than a decade
  • International volatility could deter investors

CAIRO: A surge of new shares offerings over the next few months will test whether Egypt can withstand emerging market contagion after currency crises that rattled Turkey and Argentina last month.
The government hopes offerings in five state-controlled firms already trading on the stock exchange will help trim its budget deficit.
Five private companies planning initial public offerings (IPOs) by the end of the year which could spur investment and private-sector growth, which has been moribund since Egypt’s 2011 uprising. A sixth private company plans a rights issue.
Economists say international participation would help appetite among local investors but international market volatility may be chasing them away.
“A realistic good scenario is that you stick to your timeline and you’re able to sell your entire pipeline of offerings at very compelling valuations,” said Wael Ziada, head of investment company Zilla Capital.
“A bad scenario is that if there is a deep, deep crisis in emerging markets, you may have to pull some of these offerings,” said Ziada, former head of research at EFG Hermes, Egypt’s biggest investment bank.
The Japanese brokerage Nomura this month listed Egypt as one of seven emerging market countries, including Turkey and Argentina, at risk of foreign exchange rate crises.
An economist at an Egyptian investment company said the government’s sudden push to sell shares after a hiatus of more than a decade was stretching the ability of banks managing the offerings and the appetites of investors.
“You have to do the research, test the market, do the marketing and do a road show,” said the economist, who declined to named. “The government should be staggering the offerings.”
Egypt is working on selling shares in at least 23 state-owned companies over the next few years. Analysts say much of the state sector has been suffering heavy losses and companies need major management overhauls and modernization.
The government on Monday it said it would offer five of these in the coming three months. It will start in October with a 4.5 percent stake in cigarette maker Eastern Company and a 20 percent stake in Alexandria Mineral Oils Company (AMOC).

TEN BILLION TARGET
The government is hoping the sales will help it reduce its budget deficit to 8.4 percent of GDP in the year to June 2019 from 9.8 percent last year.
Finance Minister Mohamed Maait said last week the government had budgeted 10 billion Egyptian pounds ($560 million) in revenue from share sales between now and June 30, when the current fiscal year ends.
“However, if we can get more we will be happy,” he said.
At the same time, private companies are hoping to benefit from an improved macroeconomic climate after IMF-backed reforms and an increase in tourism revenues and natural gas production.
Mohamed Elakhdar, Beltone Investment Banking’s managing director, estimated that the private offerings would reap more than 10 billion Egyptian pounds — a similar figure to expected revenue from state company sales, but over just three months.
Beltone is managing the IPOs of leasing company Sarwa Capital and textiles company Giza Spinning and Weaving and a rights issue for a third company
“Appetite, yes. There is, I believe,” said Hany Farahat, senior economist at Egyptian investment bank CI Capital.
“The key challenge is related to the process, how these transactions have to be structured and marketed to investors. This is what could make them a big success or failure.”
Another round of IPOs — both private and government — is expected in the first six months of 2019.
“We’re on a road show right now. The demand we’re seeing has been fairly healthy,” said Beltone’s Elakhdar told Reuters. “People are viewing Egypt differently than the rest of emerging markets.” ($1 = 17.8600 Egyptian pounds)