RIYADH, 7 January 2008 — Buoyed by the huge response to its Al Jawhara Ladies Fund which has yielded over 130 percent returns on investments since its establishment five years ago, Al Rajhi Financial Services (ARFS) has announced that more funds for women will be launched next year in order to enable them to benefit from the international investment climate.
ARFS, a new division of Al-Rajhi Bank, was spun out of Al-Rajhi Bank in the middle of last year within the framework of the Capital Market Authority’s regulations requiring banks to separate their investment activities (asset management, brokerage services and corporate finance) from their conventional banking services.
“The CMA wants a Chinese wall between the bank and this new entity. So while we are still owned by Al-Rajhi Bank, ARFS as its subsidiary will focus only on these three categories of services,” Trevor C. Regan, chief investment officer and head of asset management, ARFS, and Abdullah Al-Kahtani, client relations manager, told Arab News in a joint interview.
Al-Kahtani said other Saudi commercial banks had either created or were in the process of setting up such subsidiaries in the interest of promoting transparency in the investment banking operations and providing professional services to their customers. The new measure follows the recent Saudi stock market crash which affected millions of Saudis and expatriates.
Referring to the Al Jawahara Ladies Fund, Trevor said the response surpassed their expectations, indicating a high level of liquidity among Saudi women. “ARFS is considering some attractive options for women, such as investment in recognized consumer funds, hedge funds, etc. What we want to do is to recognize the opportunities for investors when selecting these funds, so that they can access new investment strategies. We’ll be more than happy to tailor investment products to their needs.”
Both Trevor and Al-Kahtani paid tributes to CMA for introducing reforms in the capital market by bringing a higher level of professionalism into it. “The whole idea behind these reforms is to encourage the people to use professional financial services to manage their investments rather than go to the market directly. During the stock market crash, the people who wanted to sell their shares directly into the market could not do so, as there was no demand. Now you can ask for redemption and get money by afternoon. More importantly, you get the benefit of diversification which helps you to achieve a risk/return tradeoff.”
Spelling out the advantages of going through professional fund managers, Trevor said that at ARFS the whole thrust of their investment strategy is to minimize the risk factor. “If you are an investor in mutual funds, you become part of a big pool of money which can be spread across different instruments and in the asset classes. We have commodity funds and 16 mutual funds. So we decide how we see the market for equities. Is it going up or down? What should be the level of exposure to various funds? From that perspective it is the fund managers who will be calling the shots rather than the individual. This is one of the major benefits of letting professionals manage your money.”
According to Al-Kahtani, clients usually look for low risk-high returns investment portfolios, which is not possible. However, emerging markets are offering lucrative returns as does the Gulf Equity Fund. He added that at one time during the boom period, stock traders got a 20-25 percent return on every riyal invested. “Now since the crash they are satisfied with a 9 percent return. The market became highly volatile after the crash.”
Asked for his assessment of the market situation, Trevor said local equities and commodities funds are attractive, provided they switch the fund money through a mix of equity and commodities for low risk and low returns. That’s the best approach for meeting long-term investment goals. Some exposure to the equity market is also necessary for the sake of good returns. But the risk/return trade-off is unavoidable,” he added.
