ING not to rush fixed-income fund in Mena
It'll be an understatement to say that the past two years were difficult for fund managers. Not only did a majority of them have to forego bonuses, many of them had to take pay-cuts while some of them lost their jobs.
However, when the worst recession since the 1930s was tightening its grip after the demise of Lehman Brothers, Farah Foustok, then the chief investment officer of ING Investment Management, was busy launching a Middle East and North Africa (Mena) equity fund for the company in December 2008.
Since its launch, the fund received an S&P AA rating within a year and the Mena Fund Manager of the Year award in January this year.
Foustok became the CEO in January 2009, received a modest bonus and is now busy test-marketing the launch of the Mena fixed-income fund, which is expected to be launched later this year.
How is ING's Mena equities fund performing?
We set up the Middle East office in December 2007. We launched the first equity fund, Mena equity fund, in December 2008. As at end-2009, we received S&P AA rating for the fund and also the Mena Fund Manager of the Year award in January this year. As ING Group, globally, we manage about €440 billion (Dh2.1 trillion) in total.
When do you expect the fund to hit its target of $500 million (Dh1.8bn)?
We started the fund with a seed capital of $3.m in December 2008. By the end of last year, we had grown it to $50m. It is very difficult to predict AUM (assets under management) growth because it depends upon international appetite. We believe we could reach anywhere between $250m-$500m in the next three years.
We believe that Middle East market is more of a mandate-driven market. Typically, our clients in the Mideast are at the government level or institutions.
Why did ING IM choose to start its Middle East operations?
If you look at the investor's equity universe of 1,400 companies, less than 10 per cent of these companies are covered by third-party research. Which means if you sit outside the Middle East and you read the research side, you don't actually know the opportunities or see many opportunities. That is where the advantage of our team comes from – being on the ground, close to the companies, understanding the companies and doing a thorough research.
Will ING Investment Management be investing less this year for the correction in valuations over last year?
We are saying the opportunities are as not obvious as they were last year, because of the valuations. It is just a little bit difficult finding opportunities this year and it does not mean that we will not find opportunities this year. If you are asking about returns, it is very difficult to predict returns.
What is ING Investment Management's investment strategy?
We had earlier identified three countries, which is now down to two – Qatar and the UAE. These two have been announced to be part of the MSCI-Emerging Markets (MSCI EM). It will probably take 12 months for them to get included.
It was estimated last year that between $50bn and $200bn flows to emerging markets. Last year, there was a real valuation gap between emerging market and Mena. Mena used to trade at a premium, but last year it was trading at a five to 10 per cent discount to emerging markets. People's perception is just to pool Middle East as one.
They don't look at the diversity of the 11 different countries and 12 different stock markets. You have the GCC, Lebanon and North Africa, which are completely different in their dynamics, economic cycle and sectors as well. The sovereign strength in the UAE is very much on investors' minds. So investors looking at opportunities here are very much looking at the sovereign strength.
Why is ING delaying the launch of its Mena fixed-income fund?
Our funds are focused on the Middle East; so we don't need to invest in Dubai if we believe there is no opportunity there. The fund we launched is very much for investors. We delayed the launch last year [to wait] until there is enough appetite on specific segment of the Middle East for a fund. We don't want to jump the gun and launch unless there is an appetite, both regionally and internationally. We have to ask our investors. We are testing the market through our distribution network regionally and internationally. We will not launch until we believe that the fund will reach a size of $50m.
Will ING be looking to launch a private equity or Islamic fund?
We have no intention of building a private equity team at this point. Islamic finance is an interesting area because obviously there is a lot of demand. We have an office in Malaysia.
We don't have an Islamic fund. We believe by not having global Islamic standards, it is difficult for us to launch a Shariah-compliant fund that can be sold globally because of the differences in belief in different areas.
PROFILE: Farah Foustok CEO, ING Investment Management
Foustok is responsible for building the investment team across various asset classes. She joined ING Investment Management Dubai as CIO in December 2007 and launched the ING Mena Equity Fund in December 2008 and became the CEO in January 2009. She has more than 15 years of experience in analysing and valuing companies in the United Kingdom, Europe and most recently in the region. Prior to joining ING Investment Management, she was head of asset management at NBD Investment Bank, managing a team of 10 professionals and close to $2bn of assets under management
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