JEDDAH, 13 March 2006 — The year 2005 was a successful one for National Commercial Bank’s (NCB) mutual funds. The funds made hefty gains. The bank has a long list of mutual funds that satisfies those seeking Shariah-compliant instruments. In addition, the bank introduced the Al Ahli Saudi Dynamic Trading Equity Fund this year to capitalize on the opportunity and the high returns of the Saudi stock market. The bank also witnessed growth in 2005 by introducing the Al Ahli Gulf Trading Equity Fund. Arab News interviewed Haitham Al-Mubarak, head of Portfolio Management at NCB’s Investment Services Division, in order to get the story behind the success of NCB’s mutual funds. The following are the excerpts from the interview:
Q. How do you compare your mutual funds with those of other banks in the Kingdom?
A. Each mutual funds provider has its philosophy and ours is to provide our customers with a diversified portfolio of mutual funds and manage for returns and risks equally. As you know, NCB was the first bank to launch a mutual fund in the Kingdom in 1979 and remains the leader of the industry because of its extensive experience and knowledge in the field. Also the first Islamic mutual fund was launched by NCB in 1987. Over the last 25 years, we have been actively involved in the market, watching closely the needs of the customers and designing our products to meet them. For example, in October last year, we offered our investors an innovative fund to help them diversify their portfolios and benefit from the upside of the six GCC markets with our Al Ahli GCC Trading Equity Fund.
Q. How are NCB funds faring and which are the most popular ones?
A. The NCB’s portfolio of mutual funds is rich and diversified; our aim is to meet the needs and requirements of various investors in the Kingdom based on their risk profiles. Over the last few years, some of our mutual funds have generated exceptional results namely our equity funds such as AlAhli Saudi Trading Equity Fund which achieved for the seventh consecutive year positive returns of around 116 percent beating its benchmark by 2 percent. Also AlAhli Saudi Dynamic Trading Equity Fund launched in April 2005 beat its goal by returning over 30 percent to its investors while providing them with reduced risk. In October of 2005, NCB launched a new fund, AlAhli GCC Trading Equity Fund, to help its customers diversify their investments across the GCC region.
Most recently, we launched a new and unique equity fund which is AlAhli Secured Saudi Trading Equity Fund, a closed-end medium term, Saudi denominated fund providing its customers with a protection of 90 percent on the capital invested.
Also the performance of our balanced funds was up with our Al Manarah High Growth Portfolio reaching 15.02 percent in profits and Al Manarah Medium Growth Portfolio 10.94 percent at the end of 2005.
Furthermore our income funds such as Al Ahli Diversified Saudi Riyal Trade Fund achieved 3.55 percent and AlAhli Saudi Riyal Trade Fund 3.14 percent by December 2005.
Q. Are there any plans to launch new funds this year? If so, can you tell us more about them?
A. Indeed we launched the Al Ahli Secured Saudi Trading Equity Fund, a unique fund, at the beginning of February. The fund is aimed at those customers who have achieved gains over the past few years and would like to keep their profits but also want to enjoy the benefits of exposure to the potential upside of the market over the next three years. The new fund provides a 90 percent protection on capital invested and thus it also suits first time investors in the Saudi market who would not be comfortable with funds that do not provide protection on the capital. The probability of losing more than 10 percent of the original capital invested in the fund is reduced further by the protection underwritten by three global financial institutions. The admission date is as soon as the date on which the manager determines that the fund is fully subscribed or 60 calendar days after the first subscription day. Moreover, we will be announcing new offerings throughout the year and the details will be unveiled upon approval from the authorities.
Q. What is the net asset value (NAV) of NCB funds?
A. Currently the total net asset value of NCB mutual funds is over SR33 Billion.
Q. How are mutual funds doing in the Kingdom?
A. During 2005, the Saudi market delivered exceptional gains for the investors in general and those investing in the mutual funds in particular enjoyed positive returns. Overall, the mutual funds industry has grown drastically in the last few years fueled by the massive surplus in the Kingdom’s budgets (2004 and 2005), the soaring oil prices, and the high liquidity in the market, as well as companies’ results and most recently the World Trade Organization (WTO) membership. The relevant authorities and the local banks have worked together extensively to raise the awareness about the industry and install a professional and systematic investment environment. Moreover, the rise in demand for the Islamic mutual funds across the region helped transform the Kingdom into one of the most reputed financial hubs of the globe. Going back to 2005, the NCB was able once again to provide its valued customers with a wide range of Shariah-compliant mutual funds that offered them competitive returns and the opportunity to diversify.
Q. Most Saudi banks are advertising in newspapers about handsome gains through mutual funds. Some of the funds are giving returns of over 100 percent. Don’t you think this is unrealistic?
A. There is no doubt that the Saudi investment environment is extremely rich with opportunities and the mutual funds industry is witnessing a great boom with profits increasing substantially. During last year alone some of our funds generated exceptional returns such as the Saudi Trading Equity Fund which returned around 116 percent to its investors beating its benchmark by 2 percent. Other fund managers in the Kingdom enjoyed triple digit returns also. That is natural since the market itself had triple digit returns.
Q. What are your expectations in the coming years about mutual funds?
A. Our view is that the mutual fund industry is on a growth pattern that will endure for the foreseeable future. Increased interest, new entrants and regulations are some of the signs that are indicating future growth. Mutual funds provide investors with a good vehicle to benefit from different markets. We encourage clients to use those vehicles and maintain a long-term view when investing. Clients are advised not to chase short-term performance amongst fund managers as they would end up losing in the long term since it is very rare for a fund manager to maintain his leading position.
