JEDDAH, 9 February 2006 — The National Commercial Bank (NCB), Saudi Arabia’s oldest and most successful provider of mutual funds, launched the Shariah-compliant AlAhli Secured Saudi Trading Equity Fund “A” here yesterday.
This new medium term, closed-end, Saudi riyal denominated fund is the latest addition to the bank’s portfolio of funds in Saudi equities. The funds include the AlAhli Saudi Trading Equity Fund and the AlAhli Saudi Dynamic Trading Equity Fund.
As the Saudi stock market is booming with over 100 percent increase in 2005, Amr Banaja, the head of marketing for the asset management sector at the NCB, said “The new fund will invest in Shariah-compliant stocks listed on the Saudi stock market, cash, Murabaha and Murabaha funds approved by the NCB’s Shariah Board and managed in compliance with the mutual funds regulations in the Kingdom.”
He added, “The fund is ideally suited for investors who have enjoyed significant capital gains over the past few years by investing directly in Saudi shares or mutual funds. Many of these investors would now like to know that they will keep those profits but they also want to enjoy some exposure to the potential upside of the market over the next three years.”
The minimum subscription to the AlAhli Secured Saudi Trading Equity Fund “A” is SR250,000 and the admission date is the date on which the manager determines that the fund is fully subscribed or 60 calendar days after the first subscription day.
“Investors should regard this investment as an illiquid one because early redemptions are not permitted. Therefore it is highly recommended that they invest only those amounts that they can comfortably spare for the period of three years until the maturity date of the fund and keep sufficient amount of cash reserve on the side for emergency needs,” Farouq Fouad Ghulam, the head of product development structuring & operational risk for the Investment Services Division at the NCB, said.
Moreover, the assets of the AlAhli Secured Saudi Trading Equity Fund will be managed actively on a daily basis to grow the capital when the local equities market is strong and to reduce exposure in times of declining markets. The probability of losing more than 10 percent of the original capital invested in the fund is reduced further by the protection underwritten by a global financial institution.
Haitham Al-Mubarak, the head of Portfolio Management at the NCB, said, “We have taken into consideration the major macroeconomic indicators and projections into the next three years as well as the current market conditions to design this new and unique fund which will offer our investors up to 100 percent exposure to the upside of the market while attempting to limit their maximum loss to no more than 10 percent.”
Banaja said “It is also an excellent fund for first time investors in the Saudi market. These investors have not been comfortable with the risks of the other funds that are offered by banks which offer no element of capital protection. This fund is more suited for the more cautious investor.”
However, Banaja cautioned that “Potential investors should understand that this fund is not designed to outperform the broader stock market because, due to its defensive investment objective, it will under most conditions not be fully invested in stocks.”
“The number of investors in mutual funds that invest in the Saudi stock market has grown to nearly half a million investors today. This growth in market depth and breadth demands that we offer multiple options to our investors to take advantage of the booming economy and high profit potential of the market,” Abdullah Al-Khatib, the head of western and southern region at the NCB, said.
NCB offers investors in the Kingdom two equities funds; the AlAhli Saudi Trading Equity Fund an open-end, high- risk fund generating long-term capital growth through investment in Shariah-compliant Saudi equities which assets reached over SR10 billion. An investor who invested SR1 million in this fund three years ago would now have an investment worth SR7.3 million.
There is also the AlAhli Saudi Dynamic Trading Equity Fund which is an open-end fund with a built-in defensive feature that aims at protecting the capital in down markets. This fund has earned over 47 percent since launch in April 2005.
NCB currently holds the largest share in the investment fund sector in the Kingdom — 41 percent of the asset total in the national banks at the end of 2004.
