The fund, which will close the first stage of fundraising on June 17, is targeting institutional investors across the Middle East, Europe and Latin America, and will be funded with $30 million of seed capital from TNI.
"The fact that we are seeding it with $30 million indicates that we mean to grow this fund to be very large. The capacity that we can see for the fund is between $500 million to $1 billion," said Walid Hayeck, TNI's asset management head.
TNI's MENA fund has full access to Saudi Arabia and can invest up to 40 percent of its assets in the kingdom. Fund managers have been scrambling to increase their exposure to the region, which boasts a growing population and massive government-sponsored infrastructure projects.
The long-only fund will follow a "sector neutral" approach and will focus on investing across sectors by keeping the weightings equal to that of the relevant index, Hayeck said.
Hayeck said investors need to have an investment horizon of three to five years to capture growth opportunities.
After the financial crisis, companies in the Middle East region have improved their balance sheets and businesses are catering more to local demand, according to the asset manager.
"We have seen lots of solid and sound balance sheets and businesses that are surprisingly cash rich," he said.
"The vulnerability to foreign demand is not there."
TNI is also targeting institutional investors with a "special situations fund," launched in August 2008. The fund has a mandate to invest across asset classes, including equities, debt instruments, convertibles and derivatives.
The special situations fund has returned 15 percent since inception and is up more than 6 percent year-to-date.
"We have never marketed the fund aggressively to institutions and now want to build on the impressive track record," Hayeck said.
The fund's top holding is a sukuk instrument issued by Saudi builder Dar Al-Arkan. It also has investments in convertible notes issued by Abu Dhabi property developer Aldar Properties.
"The sukuk (Dar Al-Arkan) is trading at 102 cents to the dollar and yielding 11 percent. The yield is interesting and the level of risk is something we are comfortable with," he said.
