Franklin’s fund to be advised by Algebra

(DENNIS B MALLARI)             

 
Franklin Templeton Investment yesterday said it will launch the first Middle East and North Africa focused equity fund to be advised by a local asset management team. The Franklin Mena Equity Fund will be domiciled in South Korea and sub-advised by Dubai-based Algebra Capital.

“The Mena is finally on investors’ radar screens and is recognised as one of the fastest growing regions in the world not only in terms of GDP growth but also in terms of capital markets and company earnings,” Joe Kawkabani, Managing Director of Algebra Capital, and sub-advisor responsible for foreign asset management of Franklin Mena Equity Master Fund, said.

“These markets are increasingly open to international investors and we are witnessing a substantial inflow from them in both the retail and institutional space.

“The region’s massive liquidity generated by high oil prices, and large government spending programmes together with greater liberalisation and transparency means investment opportunities will continue to be plentiful for both domestic as well as international investors,” Kawkabani said.

This fund offering is made possible through the strategic relationship between Franklin Templeton Investments and Algebra Capital, in which Franklin Templeton Investments holds a 25 per cent stake.

Algebra Capital, headquartered in Dubai, makes about 300 company visits a year through its local resources and research teams and conducts stock analysis and portfolio management based on its findings and expertise.

“The anticipated launch of the Mena fund in Korea clearly demonstrates the continued interest by global investors in the Mena region, particularly from Asia. In 2008, we anticipate we will be increasing our strategic partnership with Franklin Templeton by combining our in-depth knowledge and expertise of the Mena region with Franklin Templeton’s worldwide reach and perspective,” said Ziad Makkawi, Founder and CEO of Algebra Capital.

Through Franklin Mena Equity Fund, Korean investors who are interested in the Mena region can now invest in a fund managed by local portfolio managers who understand the local culture and investment environment well.

The Korea-domiciled fund is a feeder fund that invests most of its assets into the Franklin Mena Equity Master Fund. The master fund invests more than 60 per cent of its assets into Mena stocks over the long term to seek capital gains.

The Mena region, which includes Lebanon, Tunisia, Egypt, Jordan, Saudi Arabia, Qatar, Oman, the UAE, Bahrain and Kuwait, is the world’s eighth-largest economic bloc.

The market capitalisation of the Mena region in 2007 reached more than $1.3 trillion (Dh4.7trn).

The top 150 listed companies in the region have recorded an annual earnings growth rate of 40 per cent on average since 2003 and are expected to show more than 20 per cent growth this year, according to Zawya.com forecasts.

The high growth potential of the Mena region is also one of the critical factors attracting investment to the area. The Middle East possesses 41 per cent of the world’s known petroleum reserves and has abundant oil revenues as one of the largest beneficiaries of increasing natural resource prices .

The economic development of the countries in the region is also an important factor. Huge sums of money from abundant natural resources have begun to be invested into infrastructure projects for their domestic economic development.

Saudi Arabia, for example, has plans for mid-to-long-term infrastructure projects through 2024, valued at $624bn. Dubai also has $200bn in construction plans through 2025.

The focus of the region’s stock market, which in the 1990s was oriented towards finance and industrial goods, has expanded to today include communications, facilities, construction, and transportation. At the same time, the non-oil sectors’ contribution to the Mena economies is gradually increasing.