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Nordnetin wehinaari 16.1.2014: LHV Persian Gulf Fund - Tuottoa Persianlahden mittavista investoinneista, rahastonhoitaja Joel Kukemelk
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Nordnetin wehinaari 16.1.2014: LHV Persian Gulf Fund - Tuottoa Persianlahden mittavista investoinneista, rahastonhoitaja Joel Kukemelk

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LHV Persian Gulf Fund -rahasto sijoittaa Persianlahden maiden yhteistyöneuvoston (GCC) jäsenvaltioiden pörssiosakkeisiin. Rahasto valittiin parhaaksi Persianlahden alueelle sijoittavaksi rahastoksi …

LHV Persian Gulf Fund -rahasto sijoittaa Persianlahden maiden yhteistyöneuvoston (GCC) jäsenvaltioiden pörssiosakkeisiin. Rahasto valittiin parhaaksi Persianlahden alueelle sijoittavaksi rahastoksi vuonna 2012 (Zawya Thomson Reuters).

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  • 1. LHV Persian Gulf Fund Joel Kukemelk Fund Manager 16.01.2014
  • 2. Fund’s investment region • • • 2 LHV Persian Gulf Fund invests in all six of the Gulf Cooperation Council member states – the United Arab Emirates, Qatar, Saudi Arabia, Oman, Kuwait and Bahrain. GCC countries own 40% of world’s oil reserves and 20% of world’s natural gas reserves. Funds received from the sale of oil and gas are directed to investments to restructure and diversify the local economies. Breakdown of fund investments as of 31.12.2013:
  • 3. Rapidly transforming region • • • • • • Buildout of new industries – logistics, tourism, solar energy, aviation, chemicals, Islamic and conventional finance etc. EXPO 2020, FIFA World Cup 2022 – first time ever in the Middle East. UAE and Qatar upgraded to Emerging Market Status by MSCI and S&P Dow Jones. Most attractive tax framework in the world (report by World Bank and PwC). World’s busiest airport by international passenger traffic is as of 2013 Dubai. Dubai Mall had 65 mln visitors in 2012 – New York City had 52 mln visitors and Los Angeles 41 mln. Dubai 2013 3
  • 4. Fund performance As of 31.12.2013: Fund size: €26 319 097 LHV Persian Gulf Fund, A-unit, since launch Launched: 13.02.2008 Fund Manager: Joel Kukemelk (since 01.09.2010) Management fee: 1.75% Issue fee: 0% Redemption fee: 0% Performance fee: no performance fee Lock-up: no lock-up Fund type - UCITS IV 22.08.13-09.09.13 Daily trading (except on Fridays) -11.0% (Syria T+6 settlement crisis) Custodian: Swedbank 13.06.13-26.06.13 11.06.08-03.03.09 -60.0% (global financial crisis) 13.01.11-03.03.11 -13.0% (Arab Spring) 11.05.11-05.10.11 -10.0% (euro-zone crisis) Fund’s historical returns as of 31.12.2013: 4 -4.9% (emerging market sell-off) 04.04.12-28.06.12 -9.9% (Iran oil sanctions, euro-zone crisis escalation) Historical returns as of 31.12.2013: 1 year total: +49.5% 2 years total: +67.7% 3 years total: +63.8% 4 years total: +96.9% 5 years total: +119.8%
  • 5. Fund performance Since launching the fund in March 2008 LHV Persian Gulf Fund (€) has outperformed the MSCI GCC ex Saudi Arabia (net, USD) index by 53 percentage points. – Note: Comparison index is given in USD because LHV Persian Gulf Fund hedges all of its EUR/USD risk to get the underlying performance in EUR. Investments are made in local currencies that are pegged to USD. LHV Persian Gulf Fund (€) vs GCC stock markets (MSCI indices, net, USD) 140% 120% LHV Persian Gulf Fund 100% MSCI GCC ex SA +53% MSCI Qatar 80% Tadawul Saudi Arabia 60% MSCI UAE 40% MSCI Oman 20% MSCI Kuwait 5.03.2008 30.04.2008 30.06.2008 31.08.2008 31.10.2008 31.12.2008 28.02.2009 30.04.2009 30.06.2009 31.08.2009 31.10.2009 31.12.2009 28.02.2010 30.04.2010 30.06.2010 31.08.2010 31.10.2010 31.12.2010 28.02.2011 30.04.2011 30.06.2011 31.08.2011 31.10.2011 31.12.2011 29.02.2012 30.04.2012 30.06.2012 31.08.2012 31.10.2012 31.12.2012 28.02.2013 30.04.2013 30.06.2013 31.08.2013 31.10.2013 31.12.2013 0% Source: MSCI for all GCC country indices except for Saudi Arabia where Tadawul index is used. 5 MSCI Bahrain
  • 6. Fund statistics LHV Persian Gulf Fund performance statistics as of 09.01.2014: Source: Bloomberg Dividends are reinvested, 0% taxes on dividends. Fund’s standard deviation (annualised) in the last: 12 months is 13.1%; 36 months is 13.1%; 60 months is 17.5%. 6 MSCI GCC ex SA
  • 7. What kind of union is the GCC? Gulf Cooperation Council or the GCC: • • • • • • • • • • 7 Political and economical union between 6 countries. On aggregate - current account surplus every year since 1998. Member states’ currencies are pegged to USD. Created in 1981, aims are somewhat similar to the European Union. Joint military presence (Peninsula Shield Force). Common market since 2008. Majority of the people in these countries are Sunnis by religion. In total 40+ mln people live in the GCC, aggregate GDP is around $1.5 trillion. GCC has 10% of MENA population, 50% of MENA (Middle East and North-Africa) GDP. Longer-term project is common currency – initially scheduled for 2010, today’s reality is 2020+.
  • 8. Region • • • • In total there are over 400 mln people living in the GCC countries and its nearby region. In addition to that there’s India close by with 1 billion potential consumer. 1.6 billion Muslims in the world. GCC companies want to offer increasingly more products and services in nearby countries. Low correlation with other (emerging) markets. LHV Persian Gulf Fund’s correlation to MSCI Emerging Markets Index (weekly data, both in EUR) was +0.6 in 2011, +0.4 in 2012 and -0.8 in 2013. Source: Goldman Sachs, November 2011 8 Source: EFG-Hermes, October 2013
  • 9. Significance of energy prices Brent oil price (USD/barrel) last 10 years: Source: Bloomberg • • • • 9 75%-85% of GCC-countries’ budget revenues come from the sale of oil and gas. The weighted average oil price needed for the GCC-countries to cover the planned budgetary expenses and investments was $79/barrel in 2012 and $85/barrel in 2013. For the region it’s important that oil price stays above the before-mentioned levels, oil price increases are not needed. LHV Persian Gulf Fund’s correlation with oil price is low (weekly data, both in EUR): +0.2 in 2011, +0.1 in 2012 and -0.4 in 2013.
  • 10. Strong economic outlook Purchasing Managers’ Indices (PMI) in the UAE and Saudi Arabia are very strong: UAE: „New orders expanded at the fastest rate in the survey history. The rate of growth in new export business also jumped to a record high.“ Source: HSBC, markit Source: HSBC, markit Real non-oil GDP growth forecasts by EFG: Qatar UAE Oman Saudi Arabia Kuwait Bahrain 10 2013 +10.1% +4.7% +5.1% +4.5% +4.2% +3.2% 2014 +11.0% +5.4% +5.3% +5.1% +4.6% +3.5% Real GDP growth forecasts by EFG: Qatar UAE Oman Saudi Arabia Kuwait Bahrain 2013 +6.3% +3.4% +4.9% +3.0% +2.3% +4.2% 2014 +7.8% +4.3% +4.1% +4.5% +4.0% +3.1%
  • 11. Fund investments GCC countries’ stock markets’ total market capitalisation is around $1.0 trillion or 2% of global public equity. Over 700 different listed stocks. GCC countries’ index sizes as of December 2013 (source – Zawya, primary listings): – – – – – – – Saudi Arabia Qatar UAE Abu Dhabi UAE Dubai Kuwait Oman Bahrain $475 bln $160 bln $115 bln $110 bln $105 bln $25 bln $20 bln As of 31.12.2013 11
  • 12. Fund investments Some examples of historical revenues and operating incomes of some of the fund’s biggest investments. First Gulf Bank Qatar Fuel 2500 4000 2000 3000 1500 2000 1000 1000 500 0 0 2005 2006 2007 2008 Net revenue (mln USD) 2009 2010 2011 2012 2004 Operating income (mln USD) 2006 2007 Revenue (mln USD) Industries Qatar 2008 2009 2010 2011 2012 Operating income (mln USD) Qatar National Bank 6000 4000 5000 3000 4000 3000 2000 2000 1000 1000 0 0 2005 2006 2007 Revenue (mln USD) 12 2005 2008 2009 2010 2011 Operating income (mln USD) 2012 2006 2007 2008 Net revenue (mln USD) 2009 2010 2011 2012 Operating income (mln USD)
  • 13. Attractive valuation Fund investments trade at attractive multiples, offer high dividend yield and significant long-term growth prospects. Current market valuation multiples and growth figures as of 13.01.14: Real non-oil GDP growth forecasts by EFG Bloomberg 2014 estimated P/E Qatar Trailing P/B 2013 2014 10.8x 1.8x +10.1% +11.0% +4.7% +5.4% UAE Dubai 14.6x 1.3x Abu Dhabi 11.1x 1.5x Oman 11.0x 1.6x +5.1% +5.3% Saudi Arabia 12.8x 2.2x +4.5% +5.1% Kuwait 13.1x 1.3x +4.2% +4.6% Bahrain 8.7x 0.9x +3.2% +3.5% 13
  • 14. Summary of 2013 • • • • • • • • 14 United Arab Emirates and Qatar were finally upgraded to Emerging Markets. Dubai’s airport reached the status of world’s busiest airport measured by international passenger traffic eclipsing London’s Heathrow’s pole position. Saudi Arabia changed its weekend from Thursday/Friday to Friday/Saturday to be in-line with the rest of the region, big step forward towards opening up its stock market to foreign investors. Iran got a new president and it seems that positive change is in the air when it comes to relations between Iran and the western world, the nearby GCC countries will certainly benefit from this theme going forward GCC countries’ tax frameworks were recognised as the most attractive in the world by World Bank and PwC UAE’s Dubai won the right to host EXPO 2020. Dubai’s New Year Eve’s fireworks display set new Guinness record. Escalation of Syrian conflict was avoided.
  • 15. Summary of 2013 • • • • 15 We started the year with 32 investments and ended it with 35 different positions. In 2013 we made our first investments in Bahrain and now hold positions in all 6 GCC countries. During the year we managed to hold our maximum 5-star Morningstar rating in the last 3-year period and in April 2013 we were awarded the prestigious title of “Best Equity GCC Fund of 2012” by Zawya Thomson Reuters. In 2013 LHV Persian Gulf Fund units rose +49.5% in value.
  • 16. Returns vs Risk - 2013 LHV Persian Gulf Fund (green) vs all other funds (blue) in the „Middle East & North Africa“ Citywire Global universe. – Net performance, all funds calculated in USD. Source: Citywire Global 16
  • 17. Future catalysts • • United Arab Emirates and Qatar upgraded to MSCI Emerging Markets Index – Announced by MSCI in June 2013, implemented as of June 2nd, 2014. – Announced by S&P Dow Jones in October 2013, implemented as of September 2014. Large investments being made to diversify domestic economies – Dubai has recovered from 2008 real estate crisis, construction work has picked up significant pace again. Abu Dhabi has re-launched its investment projects. Dubai is hosting EXPO 2020 – first time ever in the Middle East. – In Qatar, in 2H13 and 1H14, launch of massive works for football World Cup 2022 – first time ever in the Middle East. – There are currently $1.4 trillion worth of projects (in various stages till 2025) in the UAE, $1.0 trillion in Saudi Arabia, $0.4 trillion in Qatar, $0.3 trillion in Kuwait, $0.2 trillion in Oman and $0.1 trillion in Bahrain (Zawya). In total that’s over 200% of region’s GDP. 17
  • 18. Future catalysts • • Saudi Arabia potentially opening its stock market to foreign investors – Weekend was changed from Thursday/Friday to Friday/Saturday at the end of June 2013. – In 2013 new chairman of the Capital Markets Authority was appointed. – Allowing direct investments by foreigners would likely mean a quick upgrade to MSCI Emerging Markets Index. GCC sovereign investment funds make up 50%-200% of their country’s GDP – GCC countries’ sovereign wealth funds’ aggregate size is around $2.0 trillion according to SWF Institute. Global SWF total size is $6.0 trillion. 18
  • 19. Fund Manager Joel Kukemelk is the fund manager of LHV Persian Gulf Fund – Joel has been working in LHV Bank since 2006 and in LHV Asset Management since 2010. In 2008 he graduated from the University of Tartu with a Bachelor’s degree (cum laude) in Economics and in 2010 he graduated from the same university with a Master’s degree (cum laude) in Economics, specialising in finance and accounting. In December 2009 Joel passed his CFA Level I exam and in June 2011 he also successfully passed his CFA Level II exam. – LHV Asset Management (AS LHV Varahaldus) is a fund management company supervised by the Financial Supervision Authority of Estonia. LHV Asset Management is owned by AS LHV Group, which is a holding company for LHV Asset Management as well as LHV Bank. LHV was founded in 1999 and offers its services in Estonia, Latvia, Lithuania and Finland. LHV Persian Gulf Fund is also publicly offered in Sweden, Finland and Norway. LHV Asset Management also manages mandatory (20% market share in Estonia) and supplementary pension funds in Estonia. Management board: Mihkel Oja and Kerli Lõhmus. • • 19 In April 2013 LHV Persian Gulf Fund was awarded the title of „Best Equity GCC Fund Of 2012“ by Zawya Thomson Reuters. In January 2014 Citywire rated fund manager Joel Kukemelk with the maximum Citywire AAA rating.
  • 20. Thank You! Joel Kukemelk Fund Manager of LHV Persian Gulf Fund joel.kukemelk@lhv.ee www.persiangulffund.com Materials in this seminar must not be taken as investment recommendation, investment advice or as an invitation to invest in the aforementioned shares. When buying financial services always go through the conditions of the service and consult your financial adviser. When investing into the funds go through the fund’s prospectus and the simplified prospectus and look for additional information from www.lhv.ee and www.persiangulffund.com Prior results of the investment fund do not constitute a promise or an indication of the future performance of the fund.

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