Middle East Awards 2014

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MIDDLE EAST AWARDS
SUPPLEMENT 2014
MIDDLE EAST
AWARDS
Celebrating achievement in the region
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Dear reader,
Congratulations to all the deserving winners of the Global Investor/ISF Mid-
dle East Awards 2014. There were more applications, and they were of a higher
quality, than in any previous year. Any of the firms being recognised for their
achievements in Dubai on October 29 can rightly feel proud.
It has certainly been an exciting year for the GCC region, so such an occasion is
a good time to pause for reflection and take stock of acheivements. This year will
be remembered as the one when Qatar and the UAE finally received their much-
anticipated – and well-deserved – upgrade by MSCI into its Emerging Markets
Index.
Qatar instantaneously became the biggest emerging market in the Middle East
and its main index experienced a smooth transition (see page 45). The UAE has
suffered a major stock market correction since it was formally upgraded. However,
this had little to do with the market per se and was not much more than an isolated
case (see page 54). It is actually reassuring. All markets experience shocks. To be
tested by a shock and come through it so quickly and with so little fuss demon-
strates robustness – a point that will not be lost on international investors.
It is fitting that our Middle East CEO of the year, Shayne Nelson of Emirates NBD,
represents one of these newly-upgraded nations (see page 10). His firm is on track
to deal with the overhang from 2009 – and it will be just a memory by the second
quarter of next year. He has even been able similtaneously to increase revenues
and keep down costs to the point where net profits are up 30%.
The big event of next year will, of course, be the opening of the Saudi Arabian mar-
ket to the foreign ownership of listed equities. International investors have started
to take a keen interest in developments and firms in the region and beyond have
started to plan for the momentous event (see page 35).
All these subjects, and many more, were touched on at our annual roundtable,
which was this year attended by an excellent cross-section of practitioners in the
region, from an index provider and asset managers to an asset servicer and a con-
sultant (see page 18).
With so much positive news emanating from the GCC markets, we can all feel con-
fident that next year will be one of continued progression.
Kind regards,
Alastair O’Dell
Editor
+44 20 7779 8004
aodell@euromoneyplc.com
Creditwhere
it’sdue

2 middle east awards 2014 GLOBAL INVESTOR/ISF WWW.GLOBALINVESTORMAGAZINE.COM
MIDDLE EAST AWARDS 2014 |
45
1 EDITOR’S LETTER
4 NEWS
The top stories from www.globalinvestormagazine.com
6 INVESTOR PREFERENCES
James Gavin investigates the types of investment
products that may appeal to Middle Eastern investors
more than ones designed for Western markets
REGIONAL AWARDS
10 CEO OF THE YEAR
Alastair O’Dell speaks to Shayne Nelson, Group
CEO of Emirates NBD, about his strategic priorities
for the firm and the next stages of the development
of Dubai financial centre
12 REGIONAL ASSET MANAGER
REGIONAL BROKER
13 EQUITIES MANAGER
FIXED INCOME MANAGER
14 SHARIA FUND
SUKUK MANAGER
15 BEST NEWCOMER
BEST NEW FUND
16 WEALTH MANAGER
cash MANAGER
18 ROUNDTABLE
A panel of asset managers and asset servicers discuss the
major developments in the industry and plans to support
future success
ASSET SERVICING AWARDS
28 GLOBAL CUSTODIAN
SUB-CUSTODIAN
30 FUND ADMINISTRATOR
GCC FINANCIAL CENTRE
32 TRANSITION MANAGER
MENA FINANCIAL CENTRE
34 CONSULTANCY
EXCHANGE
35 SAUDI ARABIA
The long awaited opening of the Saudi Arabian market
will soon be a reality. Paul Golden investigates how this
will transpire and what firms are doing to prepare
ASSET MANAGER AWARDS
39 BEST SAUDI ARABIA
UAE
41 QATAR
EGYPT
42 BAHRAIN
LEBANON
43 KUWAIT
44 OMAN
46 DUBAI
James Gavin reports on the return to boom-time in
the UAE market, and the accompanying build-up of
corporate debt
BROKER AWARDS
48 SAUDI ARABIA
UAE
49 QATAR
EGYPT
50 BAHRAIN
LEBANON
51 KUWAIT
OMAN
52 JORDAN
PALESTINE
54 QATAR
James Gavin considers the effect of reforms such as
increasing foreign ownership limits and the MSCI
upgrade on its capital markets
56 BEST OF THE WEB
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News |
Good corporate governance
in DIFC firms, DFSA finds
Thereisagoodlevelofcorporate
compliance from institutions
licensed by the Dubai Interna-
tional Financial Centre (DIFC)
andtheirgovernancestructures
and arrangements generally
reflected the nature, scale and
complexity of the businesses
reviewed, finds a Dubai Finan-
cial Services Authority (DFSA)
review.
However, the review also
found that in some cases the
practicesofsomeinstitutionsfell
short of their own policies. The
DFSA noted that governance
arrangements and responsi-
bilities often did not align to
business plans and strategies.
It stated that those institutions
should comply with their stated
policesoramendthemtoreflect
current practices.
A significant finding of the
review was that firms often did
not carry out structured, peri-
odic reviews of their governing
bodies and their committees,
or their effectiveness.
Ian Johnston, CEO of the
DFSA, said: “The findings of
the review provide a bench-
mark and reference that
should be used by institu-
tions to assess their corporate
governance frameworks and
practices. The DFSA is work-
ing to enhance the quality
of governance of regulated
businesses in the DIFC and
where we detect governance
failures we will rectify them
through supervisory methods
or enforcement action.”
While the DFSA routinely
reviews the quality of govern-
ance in regulated businesses in
the DIFC, this is the first full-
scale corporate governance
review and it is the first time
the DFSA has issued a report
on the subject. n
Brian Tipple joins ADIA
The Abu Dhabi Invest-
ment Authority (ADIA)
has appointed Brian Tip-
ple as its first global head of
external equities. Tipple will
managethedepartment’steam
of investment professionals
and will report to Obaid Al
Suwaidi, executive director of
external equities.
Based in Abu Dhabi, Tip-
ple will, together with senior
management, be responsible
for developing, implementing
and driving overall investment
strategy for the external equi-
ties department, as well as
overseeing the activities of
externally-managed portfolios.
Al Suwaidi said: “Over more
than three decades in the asset
management industry, Brian
has proven himself an astute
investor and leader with a
deep understanding of global
equity markets. He will play
an important role in manag-
ing the department’s existing
investments, while further
developing and refining our
strategy in the external equi-
ties space.”
Tipple joins ADIA from Key
Private Bank, where he was
chief investment officer for
the bank’s $30bn multi-asset,
multi-strategy investment
business. n
Ashmore predicts further
gains for emerging markets
Emergingmarketswillbecome
increasingly relevant in invest-
ment portfolios, according
to Ashmore as it revealed its
annual results.
Emergingnationsaregener-
ally in good health – aggregate
GDP growth in emerging mar-
kets was 4.5% in 2013 and is
expected to be higher still in
2014, inflation is at acceptable
levels and foreign exchange
(FX) reserves remain strong.
Mark Coombs, CEO of
Ashmore Group, said: “Devel-
oped markets are weaning
themselves off unprecedented
monetary policy experiments
while emerging markets need
to decide how to manage sub-
stantial FX reserves in the face
of potential foreign currency
weakness.
“This will lead to greater
balance and rising emerging
markets relevance in invest-
ment portfolios. Investors will
increasingly need to differen-
tiate between those countries
and companies that foresee
and plan for the unwinding of
global imbalances, and those
that are ill-prepared.”
Ashmore Group, a specialist
emerging markets asset man-
ager,hasrecordedassetsunder
management (AuM) of $75bn,
a slight dip from $77.4bn last
year. Nevertheless, the firm
had strong long-term invest-
ment performance with 81%
of AuM outperforming bench-
marks over three years and
92% over five years, compared
with 92% and 73%, published
last year.
Coombs added: “Ashmore’s
financial results for the year
reflect the impact of market
volatilityexperiencedformuch
of the period and the effects of
sterling strength.” n
Mirabaud hires Middle East
business development head
Mirabaud Asset Management
hashiredMajidHassanashead
of business development in the
Middle East. The move is part
of the firm’s development strat-
egytoexpanditssalesforceand
investment capabilities.
Hassan will be responsible
for promoting Mirabaud to
investors including sovereign
wealth funds, banks, pension
funds and family offices in Gulf
CooperationCouncilcountries.
He will be based in Mirabaud’s
Dubai office and join the
20-strong team led by chief
officer Olivier Honsberger.
Bertrand Bricheux, head
of sales and marketing said:
“We are very pleased to have
a dedicated specialist for the
Middle East such as Majid on
our team, particularly given
the strategic importance of the
region. Our strong presence
in Dubai with a fully-fledged
operation demonstrates the
long-term commitment of the
group towards the region.”
Hassan has worked in large
international groups, includ-
ing AIG Investments and
Standard Chartered, promot-
ing investments to investors
based in Dubai, Abu Dhabi
and Saudi Arabia. n
Emirates NBD issues
$500m capital notes
Emirates NBD has raised half a billion
dollars of capital to replace recently
repaidfunding.EmiratesNBD2014Tier
1 successfully issued $500m perpetual
tier-1 capital notes, which will allow the
firm to replace the tier-2 issue that was
repaid in July.
The issuer is guaranteed by Emirates
NBD, rated Baa1 by Moody’s and A+ by
Fitch. The notes pay a coupon of 6.375%
and are callable by the issuer after six
years and every coupon date thereafter.
“Thisissueimprovesnotonlythequal-
ity of capital but also the cost-efficiency
of the capital base,” said Shayne Nelson,
group CEO of Emirates NBD. “We were
extremely pleased with feedback from
our investor meetings in the Middle
East, Asia and Europe.”

GCC ASSET MANAGEMENT |
T
he Middle East is of course
a very cash rich these days,
with oil and gas revenues
circulating through regional
economies and yielding sub-
stantial reserves of investable capital.
Western asset managers, meanwhile,
have global investment expertise in abun-
dance. Put the two together and it should
be a great match. Yet up to now, asset
managers, whether of local or foreign
stripes, have generally struggled to make
an impact in the region.
A generally conservative investment
culture, real estate and basic money mar-
ket funds to the fore, has meant limited
appetiteforfundproducts.Andwithinsti-
tutional investors playing a less important
role – reflecting the absence until fairly
recently of a sizeable pool of pension fund
savings–comparedtoretailinvestors, the
pickings for Western players have tended
to be on thin.
The conservatism can be explained,
says one Qatari asset manager, by the fact
that wealth in Gulf Cooperation Councils
(GCC) states is relatively new. Oil prices,
andasaresultgovernmentrevenues,were
much lower 15 years ago.
“Not all but most high-net-worth
entrepreneurs in the region made their
wealth in recent years, which is the rea-
son for the real estate focus and general
conservatism,” says the Doha-based asset
management chief. “That said, this is
changingrapidlyandlowinterestratesare
helping. In Qatar in particular, interest in
owning equities is very high.”
Professional asset management is still
Thewealthofnations
International investors’ interest in GCC
assets is matched only by the region’s asset
managers’ enthusiasm for getting out on
to the world stage, says James Gavin

very small but growing in countries such
as Qatar, with total assets under manage-
ment(AuM)estimatedtobearound2%of
the free float market capitalisation.
Arindam Das, regional head of HSBC
SecuritiesServices,MiddleEastandnorth
Africa (Mena), says: “Asset and prod-
uct classes in the Mena region are quite
vanilla,mostofthemarketsaredominated
by equities. Some markets have nascent
fixed income capabilities, and there is the
odd ETF, but these have not really gained
traction yet. Recently, however, we have
seen encouraging signs in several coun-
tries to activate these markets.”
Comprehensive up-to-date data is
scant, but a survey from National Bank
of Abu Dhabi found that by mid-2012
there were 1,424 funds with assets of
$89.6bn in the Mena region, suggesting
it is punching below its weight given the
multibillionhydrocarbonsrevenuescircu-
lating through these economies.
Another survey conducted by the Qatar
Financial Centre (QFC) in 2013 detected
a bounceback in Mena asset management
with a growing interest in fixed income
among managers. Despite yields being
overshadowed by higher predicted equity
returns and the move to a more risk-on
environment, the QFC Asset Manage-
ment Barometer found that public and
private debt was becoming a mainstream
and popular investment vehicle across
Mena.
Investor base
One reason for increased confidence is
the evolution of a diversified institutional
investor base, including a local private
pension funds industry and existing state
pension funds that are becoming increas-
ingly willing to engage with local markets.
AnInvescosurveyoftheMenamarketlast
year estimated that pension funds now
made up more than 15% of all new sover-
eign assets placed in the Gulf region.
“Over the last five years the pools of cap-
ital have increased, and the pension funds
havebecomemoresophisticated.Thathas
created a lot of opportunities,” says Rich-
ard Souri, senior vice-president and head
of Middle East at Old Mutual Asset Man-
agement(OMAM),amulti-boutiqueasset
manager with $215m in AuM.
In any case, notes Souri, the conserva-
tism of Middle Eastern investors is a
sophisticated one. “Over the years inves-
tors in the region have developed a deeper
understanding of risk management and
this is evident when you look at the big
institutions, the sovereign wealth funds
and pension funds. Risk management has
become an important part of the invest-
ment process and this has led to greater
awareness of investment styles in the
market.”
Asset managers in the UAE, for exam-
ple, face a truly diverse market, says
Nigel Sillitoe, CEO of Insight Discovery,
a Dubai-based research firm. “At one end
ofthespectrumtherearearelativelysmall
number of sophisticated sovereign wealth
funds (SWFs), pension funds, and segre-
gated mandates whereas at the other end
of the spectrum are a vast number of indi-
vidual retail customers.”
Traditionally, the more sophisticated
Gulf-based clients have invested in the
broadest range of asset categories and
investment vehicles whereas the average
retail customer has been less willing to
diversify into more esoteric asset types.
The key to both markets, says Sillitoe, is
education and communication and the
more successful fund managers are heav-
ily involved in investor education and
awareness.
While customers are familiar with
almost all product types, individual retail
customers need more guidance and pro-
fessional advice. “Institutional investors
have a good awareness of product types,
but with retail investors more needs to be
donetoinformthemabouttheopportuni-
ties,” says OMAM’s Souri.
With all investors looking at total costs
of investment there has been a rise in
interest in passive, index-tracking funds
such as exchange traded funds (ETFs).
“For those customers with general prac-
tice financial advisers who do not want
to give stock level advice, multi-asset
and multi-manager funds are growing in
importance,” says Sillitoe.
Risk appetite
Many of the recent inflows are still held in
money market funds reflecting a prefer-
ence for short-term investment horizons.
Money market instruments remain the
dominant 49% of AuM in the GCC and
55% of total industry assets across Mena,
according to the QFC research.
That survey suggests the flow of wider-
Mena capital into the GCC, which has
mostly found a home in money market
funds, is expected to continue in the short
to medium term, with many expecting
these safe inflows to take on a more risk-
on guise as investors “latch on to a new
economic cycle” and show an appetite for
“movinguptheyieldcurve”and“takingon
more risk”.
The return to a more risk-on environ-
ment is also evidenced in a reweighting of
portfolios towards equities. Short-term
regionalinstabilityishavinglittlenegative
impact in the mutual funds arena, which
in any case enables investors to diversify
risk across a larger number of underlying
stock holdings take a longer-term view of
markets and stocks.
“Retail customers that might have
been attracted to individual stocks on the
local exchanges are often steered towards
mutualfundswhenthenervessetin.Well-
diversified international or multi-asset
funds provide less of a rollercoaster ride
for investors and consequently benefit
when investors’ mindsets moves to risk-
off,” says Sillitoe.
Local investor attitudes are no longer
dependent just on moves on the local
bourses. “Investors in the GCC are out-
wards-focused and are typically much
more aware of regional and international
issues. This comes from not only a com-
modities-based heritage but also from the
“Both foreign and local asset
managers will in future have to
put more effort into promoting
their services to foreign
investors”
Joel Kukemelk, LHV
“Well diversified international or multi-asset funds provide less of
a rollercoaster ride for investors and consequently benefit when
investors’ mindsets moves to risk off”
Nigel Sillitoe, Insight Discovery

GCC ASSET MANAGEMENT |
fact that so many residents of the GCC
states are either from foreign countries or
have been educated outside the GCC,” he
adds.
In the Gulf region, whether the mood
is risk-on or risk-off depends largely on
the state of the oil price and the way that
it influences investment strategies. “If oil
prices go down from where they are now,
there will be momentum towards a risk-
offsituation.Butaslongasthepricestrade
in a good range, institutions will want to
invest capital,” says Souri.
Withpoolsofcapitalincreasingoverthe
last five years, pension funds have become
more sophisticated. That has created a
lot of opportunities for asset managers.
Underpinning this is the evolution of Gulf
financial hubs QFC and the Dubai Inter-
national Financial Centre (DIFC), which
have helped develop a domestic fund
management markets and house custo-
dial and fund administration services.
Pension funds’ asset allocation strate-
gies are still evolving in the Mena region,
but Invesco’s report finds three broad
trends. One group of sophisticated pen-
sion funds have acquired expertise from
international institutions and built in-
house asset allocation models. Another
group outsources a large portion of deci-
sion-making – so-called implemented
consulting – to international consultants,
and the final group is still in the initial
phases of development, either defining
benchmarks or awaiting a decision over
the consolidation of assets from different
government employee schemes.
International attention
The emerging opportunity set in the
Middle East has not gone unnoticed by
international asset managers. OMAM is
marketing the investment capabilities of
sevenfirmstoinstitutionalinvestorsinthe
GCC,includingSWFs,localpensionfunds
and family offices. “The Middle East is a
very strategic region for us. It is a region
that is already well serviced by western
asset managers, but we will see greater
interest in covering the region is from
emerging market managers,” says Souri.
Others are moving in to acquire local
teams. In February 2014, US-headquar-
tered Lazard hired former ING managers
to its Dubai asset management business.
The new team is tasked with manag-
ing Mena and frontier markets equity
strategies for local and global clients,
leveraging Lazard asset management’s
extensive emerging markets expertise and
global research resources. Lazard did not
previously have a Middle East asset man-
agement business.
ING’s decision to close its Middle East
asset management presence was taken
following the adoption of a strategy that
entails offering only fully-fledged opera-
tions in countries where it also has a
strong insurance presence.
“International asset allocators have
been slowly investing into local equity
markets, and have been very active in
the debt market,” says Lawrie Chandler,
founder of London-based asset manager
Edale.
FirmsthatcanshowAuMabove$500m
should have sufficient clout to attract
allocations from local SWFs and global
investors alike.
What is driving the move to Mena is
that overseas investors have also slowly
returned to local markets recently. “Those
who entered in 2005-06 got burned quite
heavily so there has been a hangover from
that,” says Chandler.
There are three basic dynamics under-
way in the region. Local asset managers
investing externally, international asset
managersbuyingintoGCC securitiesand,
more unusually, the export and re-import
market, where local investors use interna-
tional wealth advisers to buy GCC bonds
and equities.
“Local asset managers are servicing
local needs, so their challenge is to export
their skills and capabilities to non-GCC
investors,” says Chandler. “They will be
competing on the international stage with
global asset managers. They will need
international status, and the golden halo
effect of Ucits. If they try to market a Cay-
man or BVI structure, they will encounter
“Over the last five years the pools of capital
have increased, and the pension funds have
become more sophisticated”
Richard Souri, Old Mutual Asset Management
“International asset allocators have been
slowly investing into local equity markets,
and have been very active in the debt market”
Lawrie Chandler, Edale

little interest and struggle now AIFM
[directive] has come into force across
Europe.”
Local asset managers may find
themselves in competition with global
investment houses that have set up a
Middle East investment desk. “If asset
managers only have funds domiciled in
a GCC nation, their capability of selling
those on the international market will be
limited,” says Chandler.
There remains a great deal of potential
for fund houses in this region. “We are
regularly being contacted by fund man-
agement companies that want to research
the potential available to them from the
GCC markets,” says Insight Discovery’s
Sillitoe. “Never a week goes by without a
conversation with potential new market
entrants. All market entry options are on
the table here in the GCC whether it be
merger or acquisition or organic.”
A multi-boutique approach is appropri-
ate for the region as it can access different
assetclassesandsectorswithdifferentspe-
cialties, as the cycles in the market change,
according to OMAM’s Souri.
Some international asset managers are
marketing Middle East funds to a broader
institutional audience, as global investors
begin to understand that the activities
of the so-called Islamic State in Syria do
not necessarily impinge on the economic
growth of Gulf states.
Joel Kukemelk, fund manager of LHV
Persian Gulf Fund, which was launched
in 2008, says: “When we started our fund,
many were focused on the Mena region as
a whole but we distinguished the oil-rich
GCC from the rest of the region. We saw
that this region had a specific investment
theme,withgovernmentsrecyclingoiland
gas revenue into their economies.
“Foreign investor participation in GCC
stock markets is very low, and that’s why
most asset managers that promote Mid-
dle East funds focus on promoting them
insidetheregion.Butthere’salotofmoney
outsidetheregionandahugepotentialfor
foreign investors, who are starting to take
more notice of the GCC. Both foreign and
local asset managers will in future have to
put more effort into promoting their ser-
vices to foreign investors.” g
Asset servicing
Assetservicingisanotherfertileareaforforeignentries.HSBChasbeenoffer-
ingsub-custodyintheregionsincethe1990s,thoughitwasnotuntil2008that
the first set of other international sub-custodians came into the Mena market.
“The dynamics of the business changed significantly as a result of the global
financial crisis,” says HSBC’s Das. “As a result, the aggressive expansion
that many had planned did not materialise. And it is not clear yet if that will
changenowthatmarketconditionshave
improved and more investors are com-
ing back into the region.”
HSBC Securities Services has been
able to retain its market share, says Das.
“While we have had an edge due to being
the first mover, we have managed to
retainthatfirstmoveradvantagebycon-
tinuously investing in the business and
engaging closely with our client base.”
The upgrade of Qatar and the UAE to
MSCI emerging market status will put the Middle East on to the radar screen
of a broader range international investors. Add to that the improved perfor-
manceintheregion,comparedwiththeflightfromriskseeninAsianmarkets,
and there will be a significant impact on the asset management industry. But,
says Chandler, the biggest impact will come from the Saudi market opening
up to foreign investors from 2015. “That is more of a tectonic shift than the
MSCI upgrade.”
“The dynamics of the
business changed
significantly as a result of
the global financial crisis”
Arindum Das,
HSBC Securities Services

CEO OF THE YEAR
S
hayne Nelson, group CEO
of Emirates NBD, has been
crowned the Global Investor/
ISFMiddleEastCEOoftheyear
duetothreefactorsthatboosted
ENBD’s performance since taking up the
position – revenue growth while control-
lingcosts,riskmanagement,andfostering
an effective corportate culture.
Emirates NBD’s net profits for the first
half of 2014 are up 30% to AED2.35bn
($639.7m), which according to Nelson
is one of the biggest achievement for the
bankduringthefirsthalfoftheyear.Itwas
achieved through a combination of very
good revenue growth and keeping costs
in control, with a cost-to-income ratio
of 30.3% for the first six months of 2014
(4.2% lower than Q1 2013).
Nelson comes from a risk management
background, so one of his key priorities
was strengthening this within the group,
as well as compliance functions. This
included creating a unit to deal with prob-
lem loans, mostly
related to real
estate, which is
apparently mak-
ing good headway
– usefully aided by
the recovery. Its
task is expected to
be finished by the
end of Q1 2015. “If
we can meet this target that would be a
verygoodoutcomeforthebankandwould
lead its growth in the future.”
Nelson has also realigned certain seg-
ments of the business to better support
the implementation of the group’s strat-
egy. He has tried to instil a “performance
culture with accountability” and has
restructured the management and gov-
ernance at the leadership level, bringing
in new faces and experienced talent into
key positions.
Looking ahead, Emirates NBD will
continue to strengthen its balance
sheet, building on work already done to
strengthen liquidity, improve its capital
and business mix, improving non-per-
forming loans and imposing higher
coverage ratios. “I want to ensure that
these improvements continue so that the
bank can take advantage of future oppor-
tunities through our clear strategy,” he
says.
TheDubaiFinancialMarket(DFM)has
set new all-time highs this year. Is this
growth sustainable, and how far could
this go?
The Dubai stock market has been the best
performing market in the region, show-
ing gains of 50% in the year till August
2014. This growth has been backed by an
improvement in
general economic
activityintheEmir-
ate. GDP growth
has been driven
by an expansion
in non-oil sectors,
particularly tour-
ism, retailing and
manufacturing.
Rising corporate profits have also been
another reason for the stellar perfor-
mance. Listed companies on the DFM
have reported healthy growth for the
first half of financial year 2014. Net profit
was up by a strong 46% [to AED12.2bn,
according to Kamco Research]. Stocks
related to the recovery of the real estate
sector have done well due to increased
profitability and overall positive senti-
ment for the sector. The banking sector
also reported healthy growth in net profits
on the back of adecline in provisions, cou-
pled with higher operating income.
The market [as of Aug 2014] trades
at 18 to 19 times earnings, which is in
line with the broader GCC markets. The
MSCI upgrade has obviously also helped
as more foreign institutional investors
have invested in UAE markets. How big
an impact the MSCI upgrade has had
needs to be ascertained through empiri-
cal studies.
Moreover,ontheeconomicfront,inves-
tor sentiment seems to be positive. The
UAE’s purchasing managers’ index (PMI)
rose to a series high of 58.4 last month,
from 58 in July, on strengthening domes-
tic and external demand.
Some of this growth is funded by cor-
porate debt – are you concerned it
building up?
TheUAEcentralbankregulatesthebanks
very closely and has set up a number of
rules regarding the right exposures. Fol-
lowing the financial crisis, banks beefed
Alastair O’Dell speaks to Shayne
Nelson, group CEO of Emirates
NBD, ahead of being awarded the
title of Global Investor/ISF Middle
East CEO of the year
Aprofitableposition
“The consolidation of the
various UAE stock markets is
perhaps another much needed
move, as this will energise
financial markets”

up their risk management
unitsandarealsomorecareful
intheirlendingpractices,with
increased due diligence on the
utilisation of funds and loans.
We do not believe that we will
see a similar situation to the
one we witnessed in pre-crisis
times. However, we all need to
be careful that the mistakes of
the past are not repeated.
What regulatory changes
would you like to see in the
UAE and wider region?
What could the authorities
do to foster the next stage of
development of the financial
markets?
According to the Financial
Stability Report published
earlier this year, the cen-
tral bank of the UAE is also
in the process of reviewing
and updating banking sector
regulations to align local regu-
lations with international best
practice.
One of the major changes in
theUAEfinancialservicessec-
tor has been the much awaited
Al Etihad Credit Bureau
becoming operational. With
the consumer credit reports
now available for members
of the bureau, we can expect
to see a significant impact on
the lending patterns of UAE
banks. While there may be a
drop in consumer lending in
the short term, we believe the
bureauwillprovetobeamajor
positivemoveinthelongterm.
Another upcoming change will include
the requirement for banks to hold capi-
tal in line with the requirements of Basel
III rules, a set of international capital
adequacy standards that are expected to
further strengthen the framework in the
financial services sector.
The consolidation of the various UAE
stock markets is perhaps another much
neededmove,asthiswillenergisefinancial
markets, making it easier to stimulating
trade and attract more foreign invest-
ment,aswellasmakeiteasierforinvestors
to operate across the markets
How is Emirates NBD going to strategi-
cally position itself to take advantage of
the Saudi Arabian Tadawul opening in
2015?
Emirates NBD is the only UAE bank to
have a full branch licence in the King-
dom of Saudi Arabia (KSA). Alongside
this we are the only foreign bank to have
a full-fledged investment banking and
brokerage license from the Capital Mar-
ket Authority (CMA) for our investment
banking entity ENBD Capital KSA.
This entity has licence to offer broker-
age, asset management, custody, advisory
and investment banking [debt and equity
capital market] services. We have already
established full brokerage operations
and we believe we have the opportunity
to become a major conduit for foreign
funds flowing into the Tadawul once that
is allowed.
Based on demand from our clients and
customers, we are also in the process of
introducing other services such as margin
lending. With our asset management unit
here in DIFC, we are in a good position to
set up funds focused on the Tadawul. We
will streamline our plans as we see the
market develop.
The first IPO in Dubai in five
years took place recently.
How significant was this?
The recent IPO revival in the
UAE is a reflection of Dubai’s
resurgent economy. In addi-
tion to underscoring the
DFM’s performance, it is also
driven by the UAE’s upgrade
to emerging market status by
MSCI. The growing interest
from foreign investors will
further energise the markets.
Rising corporate profits and
an increased confidence in the
keysectorsoftheeconomywill
drive the demand for invest-
ment and capital. With overall
sentiment towards the posi-
tive side, IPO activity is bound
to pick up as business groups
unlock value and raise capi-
tal for expansion in a growing
economy.
How many financial centres
does the GCC need? Are sev-
eral needed or should there
be consolidation?
A multi-market system is not
unique to the GCC and it can
prove to be a viable model,
with alignment of systems and
regulations. To do that, indi-
vidual centres need to focus on
developing distinct and niche
capabilities to avoid the risk
of cannibalisation. A consoli-
datedregionalfinancialcentre
based on the European model
can provide a stronger propo-
sition to all stakeholders.
To what extent is the UAE a magnet for
capital in the region?
The UAE has established itself as a world
class financial destination, with bank
deposits rising by AED111bn in 2013,
compared with an increase of AED98bn
in 2012. Deposits have further increased
by AED66bn in the period up to April this
year.
However, banks need to be careful
not to overlend in this increased liquid-
ity scenario in the economy. Some of the
deposits and liquidity which have come in
duetoUAE’spositionasasafehaveninthe
region might not be for the long term and
might gradually flow if conditions in some
of the strife-riven countries improve.
We at Emirates NBD are being careful
in this regard and have set ourselves a tar-
get of 90% to 95% loan-to-deposit ratio
so that we are not overstretched if the tide
turns. g
“We do not believe that we will see a similar
situation to the one we witnessed in pre-crisis
times. However, we all need to be careful”

REGIONAL ASSET MANAGER
QNBAssetManagement
The Qatari fund manager has consistently
outperformed benchmarks
QNB Asset Management describes itself as the leading asset
management firm in Qatar, with assets under management of
approximately QAR17bn ($4.7bn).
Since inception, all of its funds have outperformed their
respective benchmarks, according to the firm. This year the Al
WataniFundI,forQatarisonly,hasgrownanimpressive34.46%
year-to-date. The primary aims of Al Watani Fund I are to seek
outperform the Qatar Exchange Index while trying to reduce
the associated risk. The Al Watani Fund I has outperformed the
Qatar Exchange index ten times over since its inception in 2005
– 106.4% return against the benchmark of 10.03%.
The Al Watani Fund II, for non-Qataris only, has grown 34%
year-to-date and has outperformed the Qatar Exchange index by
almost 90% since inception in October 2005. All statistics are as
of May 2014.
“Our funds consistently meet their objectives and outperform
their respective benchmarks. Our Al Watani Funds launched
back in October 2005 have outperformed,” says Ather Naqi, head
of business development. “We also manage discretionary man-
datesonQatar,GCCandotheremergingmarketsonequitiesand
global bonds.”
QNB was the first Qatari bank to launch a debt fund in its
domestic market. Aiming to provide clients with stable returns
and a low risk investment opportunity that supports the capital
accumulation. This year QNB launched the QNB Commodity
Fund,aninvestmenttoolthatisregulatedbyQatarCentralBank.
“QNB is always seeking ways to enhance the range of attractive
investment opportunities available to its customers. The launch
of the QNB Commodity Fund is a testament to our creative and
innovative approach,” says a spokesman for the bank.
“QNBoffersawiderangeofinvestmentproducts–funds,struc-
tured notes and portfolio management services relating to local
and regional markets that are tailored to meet each customer’s
risk profile and specific investment strategy. Clients’ investments
are continually managed and under the watchful eye of our expe-
rienced team of fund managers.”
REGIONAL BROKER
MubasherFinancialServices
Investment in research has been vital to the success
of Mubasher
Mubasher Financial Services (MFS) is one of the leading pro-
viders of regional brokerage in the Middle East for institutional
investors. MFS was formed in 2006 and is regulated by the Cen-
tral Bank of Bahrain as a Category 1 investment business firm.
The head office of MFS is located in Bahrain and the firm has
branches in Dubai, Jordan and Riyadh.
As a single counterparty, MFS provides institutions with a
range of services to facilitate trading, clearing and settlement
across the GCC, Middle East and most major developed stock
markets. It employs more than 120 professionals across the
region.Servicesincludeomnibuscapabilityfordealingacrossthe
region and direct market access. The firm’s worked order capa-
bility means MFS dealers target common benchmarks such as
volume-weighted average price or VWAP (the ratio of the value
traded to total volume traded over a particular time horizon),
percentage volume and arrival price.
Backofficeservicesincludeclearing,FXandcorporateactions.
Other services offered include delivery versus payment (DVP)
trading limits and fix order routing from all major networks
including Reuters, Bloomberg and Fidessa. MFS offers profes-
sional dealing and order management screens to trade on behalf
of multiple customer accounts, covering position keeping, real
time and historical data, charting and technical analysis. Mar-
ket information is drawn from sales traders as well as third party
broker research.
First launched in the UAE in 2005, Mubasher Direct Brokers
Financial Services (Mubasher DBFS) introduced real time mar-
ket data and online trading in the United Arab Emirates and is
now one of the most recognised trading companies in the UAE
market, a position reflected by its market share and client base.
The Mubasher DBFS platform provides direct market access
to individual clients and portfolio managers for local markets
through a single account facility for multi-trading, supported
by in-depth research and analysis and an array of trading tools.
Clients can trade from any location and receive real time market
information from any web portal.
Professional trading tools are designed to help clients optimise
orders and clients can access research and analysis from experts
whomonitorglobalmarketstoprovideinformationandtranslate
the implications of events on a periodic basis.

EQUITIES MANAGER
NBKCapital
Mena equities team increases AuM despite
challenging conditions
NBK Capital manages three mutual funds (a GCC Fund, a Qatar
Equity Fund and a Kuwait Equity Fund) as well as separately
managed accounts or SMAs for institutional and high net worth
clients.
Mena equities, the department responsible for managing
listed equities within the asset management group of NBK Capi-
tal, managed to achieve returns above benchmark during the
judging period. The NBK Gulf Equity Fund returned 29% while
the regional markets, as measured by the S&P GCC Composite
LargeMid Cap Index, returned 22%. The NBK Qatar Equity
Fundreturned20%,inlinewithitsbenchmark.TheNBKKuwait
Equity Fund returned 18% – outperforming its benchmark by
5% – and the SMA portfolios recorded returns as high as 33%
and alpha of 12%.
Mena equities managed to increase its AuM significantly in
2013 in what was otherwise a challenging year for asset raising in
the region. NBK Capital believes that its competitive advantage
over other asset managers in Kuwait is due to three sources of
strength: an experienced team employing best practice invest-
ment and risk management processes; a wide product offering;
and the strong financial position of parent NBK Capital.
NBKCapitalemploysateamconsistingofthreeportfolioman-
agers and seven buy-side analysts. The portfolio managers cover
the different countries in the region and have extensive experi-
ence in managing Mena and GCC equities, while the analysts are
sector-focused and employ state-of-the-art financial models to
value listed companies and build in its knowledge of the different
value drivers into the process, according to the firm.
NBK Capital’s investment process adheres to global standards
inmanaginglistedequitiesandemploysadvancedportfolioman-
agement techniques. The systems used by its portfolio managers
and buy-side analysts are almost unique in the region, according
to the firm, and allows it to streamline the research and invest-
ment management processes, in addition to adhering to the best
practicestandardsintheareasofperformancemeasurementand
reporting.
In terms of advanced risk management tools, NBK Capital
adopts two layers of ex-ante and ex-post risk measurement and
management techniques. Both layers are embedded in the entire
investment process and ensure adherence to investment guide-
lines and risk controls.
FIXED INCOME MANAGER
EmiratesNBDAssetManagement
Broadening client options yields success for
Emirates NBD
Emirates NBD Asset Management (ENBD AM) is part of an
independent asset management division based in the DIFC and
backed by parent Emirates NBD Group, one of the largest finan-
cial institutions in the region. It is regulated by the DFSA as a
category II firm, with the additional ability to operate an Islamic
window.
The firm provides a range of investment products structured
on either a Sharia compliant or conventional basis, covering all
major asset classes, including emerging market and Mena debt,
from in-house managed public funds to bespoke discretionary
portfolios.
Withinthefixedincomespace,theteamemployssophisticated
techniques to drive performance and control risk, for example
holding US treasury futures to hedge interest rates and employ-
ing CDS on its emerging market strategy. The head of the desk,
Usman Ahmed, who has been with the business for almost five
years, is recognised as a leading expert in Mena debt.
ENBD AM has recorded AuM growth of 97% since October
2012 to AED9.63bn. Total fixed income desk AuM has increased
to $1bn and profitability was up 170% in 2013, with 2014 profits
already ahead of FY 2013 levels at end-July 2014.
Jersey funds AuM has risen to $1.24bn and new Luxembourg
SICAV at $105m is expected to increase with the launch of eight
new Luxembourg SICAV funds (including two fixed income
funds). The New Fixed Income SICAV fund is up 8% since incep-
tion (October 2013) and there has been consistent year-on-year
benchmark outperformance in fixed income.
BothEmiratesMenaFixedIncomeandIslamicMoneyMarket
Funds have outperformed the benchmark every year since incep-
tionin2010,withadifferenceof+80bpsand+11bpsrespectively
overthelast12months.SinceJuly2013,theEmiratesMenaFixed
Income, Global Sukuk, Emerging Market Corporate Absolute
Return and Money Market Funds returned 8.9%, 6.2%, 7.8%,
and 0.4% respectively.
Over the last year, ENBD AM has demonstrated initiative in
creating opportunities for clients, including the launch of two
new Luxembourg SICAV funds and extension of the product
range to include emerging market exposure across both equities
and debt.
Following a tie up with Jupiter Asset Management for its
global funds platforms, assets have risen by more than 60% and
the firm has also made improvements to information provision.
Its funds are domiciled in Jersey (regulated by the Jersey Finan-
cial Services Commission) and in Luxembourg (regulated by the
Commission de Survellance du Secteur Financier).

SHARIA FUND MANAGER
RasmalaEgyptAssetManagement
The asset manager’s equity fund topped the
Egyptian performance ladder this year
Over the years, Rasmala Egypt Asset Management (REAM) has
consistently achieved. Its equity fund ranked very highly on the
Egyptian performance ladder during the 2013/14 financial year,
ending in second place among 22 Egyptian funds. In 2013 the
asset manager significantly outperformed the market, with the
equity composite average return of 17.1% and 15.1% for Q1 2014.
This performance resulted in a wave of additional inflow from
existing clients, often following annual reviews of their asset
managers.
Assets under management (AuM) have increased significantly
during the past three years from EGP2.1bn ($290m) in 2011
to EGP3.3bn in 2012 and to EGP4.7bn in 2013. AuM reached
EGP5.6bn during May 2014. This is an impressive achievement
given a difficult year with an heated political climate and chal-
lenging economic developments, including the Egyptian Central
Bank decree that limited banks’ money market and fixed income
fund assets to 7.5% of banks’ total deposits. Through innova-
tive and well-tailored investment solutions, REAM was able to
attract new money from existing clients as well as new local and
international clients, including the largest sovereign wealth fund
worldwide.
REAM is the strongest and fastest-growing asset manager in
the market, according to the firm. The investment management
team boasts “diversified expertise coupled with creative thinking
which allow offering our clients unique outcomes and exceeding
their expectations”, according to a spokesman. It puts its growth
in AuM down to following a product-tailored strategy – the
company developed a new investment strategy called constant
proportion portfolio insurance (CPPI). This trading strategy
aims to provide a fixed minimum return at all times, or at a set
date in the future.
REAM’s approach is focused on three key themes – offering
value to clients, meeting differing client objectives, and provid-
ing excellent and consistent investment performance. It aims to
be regarded as a standard bearer for professional asset manage-
ment, through offering a broad range of investment solutions in
all the available asset classes in Egypt.
REAM has a strong buy-side proprietary research function. It
actively engages with the companies it analyses and has ongoing
discussionswiththeirmanagementtomakesurethatitsresearch
stays abreast changing dynamics, according to the firm. In the
lastsixmonthsalonethishasheld73meetingsand16conference
calls with management.
The company is also highly committed to a solid corporate
socialresponsibilityprogrammeaimedatdevelopinglocalindus-
try and markets. It holds investment courses for members of the
investment community and top university graduates, as well as
providing scholarships to employees so that they can complete
the Chartered Financial Analyst qualification. It maintains an
interactive dialogue with clients by offering courses that brief
themonfundamentalaspectsofprofessionalassetmanagement.
SUKUK MANAGER
BLME
The London-based, Dubai-listed bank has grown
AuM in a challenging year
Bank of London and The Middle East (BLME) has continued
to grow its assets under management where many Islamic asset
managers have faced a challenging year. A key achievement for
BLMEhasbeenthestrongperformanceofitsGlobalSukukFund.
Originally launched in 2011 as the High Yield Fund, the Global
Sukuk Fund provides investors with exposure to a diversified
portfolio of sukuk. Since its launch, the fund has demonstrated
top-quartile performance in its peer group, as assessed by Reu-
ters’ fund ranking service, Lipper Hindsight. Since inception it
has ranked 68 out of 480 funds. It has also achieved a place in
the top quartile in the rolling three year category, ranking 71 out
of 488. BLME attributes its performance to a rigorous invest-
mentprocessandstrictriskmanagementframework.Thefundis
available to trade on a daily basis and it is available in US dollars,
euros, sterling and Australian dollars.
BLME is an independent UK, wholesale sharia-compliant
bank based in London. The majority of its clients are based in
the UAE and it has a representative office in the DIFC. Its asset
management team is dedicated to delivering client-focused
investment solutions tailored to client’s specific requirements.
BLME offer a wide range of products and solutions, including
fixed income, real estate, equities and real assets.
BLMEreceivedUKFinancialServicesAuthority(FSA)author-
isation in July 2007 and is the largest Islamic bank in Europe. It
is led by a management team that brings together a combina-
tion of experienced international bankers and experts in Islamic
finance.ThecoredivisionsthatmakeupBLME’sofferingarecor-
porate banking, treasury and wealth management comprising of
private banking and asset management. To ensure that services
and operations are wholly sharia-compliant the bank has a dedi-
cated sharia supervisory board, which ensures that all policy and
practice, as well as our corporate governance, are in accordance
with sharia principles.

NEWCOMER
LazardAssetManagement
Opened a new office in Dubai following
unprecedented period of growth
Lazard Asset Management has demonstrated excellent emerg-
ing markets performance during turbulent market conditions
with 18 of its 21 emerging market strategies outperforming over
the 12 months to June 30 2014. Its performance and large net
inflowshavehelpedassetsappreciatebyapproximately20%over
the period, making it one of unprecedented growth for the firm,
taking assets up to a record £107bn ($175bn) including £38bn
across 21 equity and fixed-income emerging market strategies.
LazardreceiveditsregulatorylicenseforDubaiinQ22014and
it immediately opened a new office, which provides investment
management services and client servicing. By June 30 2014 it
hadnineemployeesledbyseniorexecutiveofficerFarahFoustok,
who has worked in the investment field since 1994 and in 2012
waselectedasthechairpersonoftheboardfortheUAEFinancial
Services Association.
Lazard Equity Strategy Mena is an actively managed strategy
driven by a bottom-up investment process that focuses on the
underlying fundamental drivers of individual companies. “The
team looks at what helps companies create value for sharehold-
ers through fundamental analysis that identifies sustainable
visible returns and superior management,” says a spokesman. “It
is physical businesses that drive investment, not stock names on
a terminal screen.”
The Mena equity strategy seeks to extract value “from what is
an increasingly important component of the emerging-markets
opportunity” by focusing on the fundamental drivers that help
companiesachievevalueforshareholders.Theportfoliomanage-
ment team have been managing mandates in the Mena region,
together as a team, for seven years. The team’s local experience
and networks of connections, “helps establish strong corporate
relationshipswithlocalcompanies,enableittoidentifyunderval-
uedandundiscoveredcompanieswithqualityearningsgrowthin
a fast-growing region of the developing world”.
Lazard is committed to expanding its global footprint in the
emergingmarketsspace.InadditiontotheDubaiofficeitopened
another one in Singapore, where it received its regulatory license
in the third quarter of 2013. It set up in Dubai partly in recogni-
tionthatemergingmarketinvestmentischanging:“Theremoval
of Korea, Taiwan and Singapore from EM indices has provided
investor opportunities.”
Along with traditional long-only, value-oriented emerging
market equity strategies, Lazard has introduced more sophisti-
cated equity, fixed income and multi-asset strategies. It has also
responded to increased concerns about risk in the UK pension
world by introducing emerging low volatility strategies.
NEW FUND
NBAD–CashPlusFund
New fund offers customers higher rates than
conventional deposits while providing liquidity
The National Bank of Abu Dhabi (NBAD) Asset Management
Group launched the Cash Plus Fund in July 2014. The fund
is designed to offer liquidity, capital preservation and yield
enhancement. It says the fund allows investors to benefit from
higher rates than conventional deposits and while benefiting
from liquidity. Designed for corporates, institutions and high-
net-worth individuals, the fund ensures its clients’ liquidity
position is maintained.
“NBAD has identified growth opportunities and ensured
consistently healthy and robust growth in AuM. Our asset man-
agement group is a pioneer in the UAE,” says Shreeja Soman,
customer relationship manager at NBAD Asset Management.
“Weidentifiedgrowthopportunitiesintheliquiditymanagement
solutions segment and put in a fully-resourced research and fund
managementteamtomanageclientassets.Thishasenabledusto
win a succession of institutional mandates and launch a number
of mutual funds, which has propelled us to be regarded as one
of the biggest and one of the best asset managers in the region.”
The fund is an open-ended, actively-managed product which
aims to provide a yield in excess of overnight deposits, with
income distributed daily in the form of additional units. It aims
to seize the best opportunities available by investing in a range of
high-quality money market instruments in the UAE and wider
Mena region in addition to Asia and Europe. Fund managers
select money market instruments, including term deposits, cer-
tificates of deposit, commercial papers, floating rate notes and
short term bonds from banks and corporates in the Mena region,
Asia and Europe.
Assets are diversified across a range of durations and liquid-
ity terms in order to maximise the potential for high returns,
while avoiding increase in volatility or hampering daily liquidity.
Soman tells Global Investor/ISF that more innovative products
will be released shortly.
“NBAD has been a pioneer of mutual funds in the region. In
2013 we launched the Mena Dividend Leader Fund, which has
grown to over $324m in a short span of time,” she says.
“We have bold expansion plans and will be adding further
asset classes over the coming months and expect to launch some
headline grabbing initiatives very soon. We believe in long-term
commitment to the markets that we operate in and will continue
todevotesignificantresourcestoanalysingandmanaginginvest-
mentsthatsetusapartfromourcompetitionandcontinuetogive
comfort to our esteemed investors.”

WEALTH MANAGER
Barclays
Regional initiatives to benefit from global
investment
Last year Barclays announced plans to invest £400m ($650m)
in its wealth and investment management business globally.
Resultingfromthisinvestment,oneofthekeyinitiativesinMena
includes BARX FX and BARX Comet, through which Barclays
provides bankers and advisors in the region with direct access to
prices for FX and structured products. This resulted in clients
benefitting from greater speed of execution, streamlined docu-
mentationandtheabilitytotradeatsmallerticketsizes.Thetime
takentoexecuteareverseconvertibletradefromtheMenaregion
has reduced from a couple of hours to just a click of a button with
straight-through processing.
Toensureclientsarereceivingconsistentproactiveinvestment
advice and specific investment expertise, Barclays now has a sys-
tem whereby all clients with AuM over £5m have a dedicated
investment advisor in addition to a private banker.
Senior team members from Barclays’ global research teams in
London, Asia and Africa visit Mena quarterly to meet clients and
host roadshows to showcase insights into the market outlook.
The Mena private banking team is organised in line with specific
clientsegments,toensurethatclientsreceiveaservicefocusedon
their specific needs in their preferred language.
A new internal key client framework was rolled out in the
region in addition to Barclays’ global key client framework to
ensure all ultra-high-net-worth (UHNW) clients have access to
Barclays’ institutional-level expertise and advice and access to a
much broader spectrum of investment ideas.
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Ever wondered what ROI
actually feels like?

MIDDLE EAST ROUNDTABLE |
What happened to equity valuations
and inflows following the entry of
the United Arab Emirates (UAE) and
QatarintotheMSCIEmergingMarkets
Index?
Robert Ansari: By the time MSCI has
madeitsannouncementsaboutthereclas-
sification of the UAE and Qatar, investors
were already moving into these markets.
By way of context, the amount of money
tracking emerging markets now is about
$1.5trn and of that approximately 20% is
passive, which means that 80% of what
was mathematically going to track these
markets could have moved before the
countries entered the MSCI Emerging
Markets Index. Really, the MSCI catego-
risation of these countries was following
investor sentiment rather than leading it.
To gauge how much of the flows will
have arrived by the time an index change
like this takes place, it is worth just recap-
pingtheMSCImethodology.Thefirststep
is that MSCI takes feedback from inves-
tors around the world – MSCI is then a
middle man that provides information
back to the regulators and exchanges,
which then react to that feedback.
The big misconception is that people
thinkthatoncethoserulesarepassedthen
we are good to go, but the reality is that
once those rules are passed, what has to
happen is investors need to enjoy the ben-
efit of those changes. So, if it is something
likedeliveryversuspayment(DVP),inves-
torsneedtoseetheimpactofarulechange
rather than just a rule change. So, by the
time we get to the point of announce-
ment a lot of work has already happened.
In a way, MSCI’s classification is almost
a by-product of things that are already
happening rather than the cause of things
happening.
Hammad Izz-e-Hamid: According to
The accession of
UAE and Qatar to
the MSCI EM index
and the prospect of
opening of Saudi
Arabia’s Tadawul is
shifting the investor
base in the region.
Global Investor/ISF
speaks to seven
experts in the region
PARTICIPANTSChair: Hugo Cox, Global investor/ISF
Robert Ansari, executive director and head of Middle East, MSCI
Hammad Izz-e-Hamid, securities services, Middle East and Africa, Deutsche Bank
Arindam Das, regional head of securities services, Mena, HSBC
Husayn Shahrur, executive director of Mena Equities at NBK Capital
Ajay Kumar, assistant general manager, asset management, Qatar National Bank
Claus Nouveau-Nikolajsen, managing director, global markets, ADS Securities
Nigel Sillitoe, CEO, Insight Discovery
Greatexpectations

analyst reports, $1bn to $2bn was likely to
come into the markets over the course of
one to two years. There is understandably
a build-up and a sharp rise in anticipation
of the actual inclusion in the index and a
correctionphasethereafter.Ingeneral,we
believethattherewillbeincreasedflowsas
the market coverage increases. Macroeco-
nomic fundamentals remain strong and
should support stable inflow for institu-
tional funds.
Arindam Das: The inflow has been far
higher than analysts expected. Initial
expectations were about $1.5bn. In the
period May to June, we saw assets in our
custody increase by more than $3.5bn.
Part of it was market movement, but a lot
of it was actual flow. It is difficult to esti-
mate how much of this was contributed
by passive funds, but I would think that
a substantial amount was through them
because active funds had the whole year
leading up to this date to rebalance their
portfoliosandinvestinthesetwomarkets.
Overall we underestimated the amount of
passive funds that would come in follow-
ing the upgrade.
Is the quality of corporate governance
in the region improving, especially
post-upgrade?
HusaynShahrur:Inthedaysandmonths
leadingtothecountriesenteringtheindex
we saw a lot of passive money coming in.
This is not very relevant to improvements
in the corporate governance and wider
development of these capital markets as
this money does not scrutinise companies
and does not differentiate between com-
panies with good practices or otherwise.
By contrast, the active money, which is
supposed to be chasing after good compa-
nies or good sectors, has different impact
in this regard. As we go along, these coun-
tries will register increasingly on the radar
of fund managers and institutional inves-
tors. Issues of corporate governance will
come up more and more and companies
that have lax practices will have to adapt
and evolve if they are going to attract a
wider investor base.
Ansari: This is still a priority. A lot of
international asset owners now look for
a high level of self-discipline. We now get
a lot of fund managers coming to us and
saying: “We need to have a stricter level of
control or a higher culture of risk [assess-
ment]inourorganisations.”Andthereisa
shift in those companies from calculating
risks using basic tools to products that are
recognised by international investors.
Das: Frankly, if you talk to investors and
intermediaries they do not yet feel that
everything is right. There are still con-
cerns about the settlement infrastructure
and there are still concerns about the level
of custodian control. So the full quantum
of the money that can come in is still not

invested. If you take asset managers or
globalcustodiansinJapanandKoreaorin
thewest,thereisstillafairbitofapprehen-
sion about the way the markets operate,
including the dual account structure and
the challenges with the irrevocable rejec-
tion process. Part of this is an education
process.
We need to better articulate the
improvements that have been made to the
settlement process in the last few years,
but there is still scope for improvement.
The reassuring part is that the market
authorities are open to feedback and are
willing to change.
Ajay Kumar: MSCI classification and the
process towards classification has recon-
figured the region’s markets. The process
towards classification helped restructure
the settlement mechanism and opened up
better foreign participation.
First, it is helping improve governance
– companies have begun to realise that
sophisticatedinvestorswillofferpremium
to companies with better governance and
that will put others under pressure to
improve disclosure norms. This benefits
the market, as good disclosures will make
bad policies difficult to conduct.
Second, the cost of trading comes
down. For large fund managers such as
us, impact cost is a source of performance
drag.Withlargerforeigninvestorscoming
in the impact cost comes down.
Third, these markets had a homogene-
ous set of investors that resulted in a herd
mentality – the classification has brought
some heterogeneity in investors, a wider
spectrum of investors across liquidity and
risk curve.
But this move is not without its risks
– investors need to realise the paradigm
has changed. The volatility has increased,
correlationshaveshifted.Whentheglobal
financialcrisistookholdyousuddenlysaw
a large amount of foreign institutional
money moving out of this region. At this
time it was not too much of a problem,
fortunately, because foreign institutional
investorswerestillnotaverylargeportion
of this market.
Now, going forward, that is going to
be different. Investors will need to brace
themselves for strong fund flows that may
be independent of domestic considera-
tions. Index providers meanwhile need to
understand the market better when rebal-
ancing – the recent experiences of both
MSCI and S&P is a case in point.
What can investors expect from the
prospect of the Saudi Arabian equity
market opening to foreign investors
next year?
“International
asset management
companies are
interested in
the region and
particularly in UAE”
Nigel Sillitoe,
Insight Discovery
“When the outside
world look at the UAE
they don’t necessarily
appreciate that there
are two distinct
exchanges”
Robert Ansari, MSCI

Das: When international investors come
into this market, I think the biggest chal-
lenge they will face is the shift to a short
settlement cycle of T+0, which is very
different from most developed and even
emerging markets. While in China A
shares has a somewhat similar settle-
ment cycle – stock on T, cash on T+1 – the
sheer size and attractiveness of the China
market has drawn many international
institutional investors.
However, many others have stayed
out and MSCI has not included China A
shares in its Emerging Markets Index.
Thus a T+0 cycle will pose its own chal-
lenges to foreign investors, but will not be
a showstopper. The good thing is that we
are now going through the consultation
phase – although the consultation is more
about the draft regulations on qualified
foreign investors (QFI) rather than the
clearing and settlement model. Practi-
cally speaking, I think we will have to start
with the current cycle of T+0 and move to
a longer settlement cycle as we go along.
Izz-e-Hamid: The opening up of the Tad-
awul to provide direct access will have a
significant impact on the capital markets
landscape. We understand that the regu-
latory authorities in the kingdom have
adopted a consultative approach towards
opening of the market. The rule of thumb
is that this is going to be a gradual and
phased process.
The regulatory
authorities are aware
of the standards that
are in place in the
regional markets and
those that are in prac-
tice internationally.
The regulators would
not want to disturb
the local operating
environment too
much at the outset,
and will ensure sta-
bility is maintained
as further steps are
taken to open the
market fully. Foreign
portfolioflows,which
analysts expect to be
in the range of about
$30bn-$50bn after
the market opens, will be closely linked to
the addition of Saudi Arabia to the MSCI
Index. Given the size and scale of the
Saudi Arabian market, it is quite probable
that they may make a direct entry to the
Emerging Markets Index.
Das: The number doing the rounds is that
“We
definitely
see a trend
where some
of the typical
family offices
in the UAE are
maturing and
looking to
list”
Claus
Nouveau-
Nikolajsen,
ADS Securities
“Companies have
begun to realise that
sophisticatedinvestors
will offer premium
to companies with
better governance that
will put others under
pressure to improve”
Ajay Kumar,
Qatar National Bank

there is a potential opportunity of $50bn-
plusworthofflowscomingintothemarket
in due course, as and when Saudi Arabia is
included in the MSCI Emerging Markets
Index. However, that will take time – an
MSCI review can be initiated only in June
2015 for a decision regarding the upgrade
in June 2016, for implementation in June
2017 – and a number of steps need to be
taken to have enhanced clearing and set-
tlement procedures, greater custodian
control, and avoid prefunding and pre-
validation before the market is upgraded.
However, the market opening and
liberalisation is always an evolutionary
process and we are privileged to have
a very responsive regulator and stock
exchange in Saudi Arabia – so we have no
doubt that solutions will be found to any
challenges in hand.
Izz-e-Hamid: The market opening, pos-
sible inclusion in indices and increased
foreign participation will benefit Saudi
Arabia in the same manner that has been
observed in other markets. There will be
further improvements in corporate gov-
ernance and the systemic infrastructure,
elementsthatareofparticularimportance
to foreign institutional investors.
The opening up of the market and the
QFI regime shall bring to the fore the
importanceofthecustodianfunction.The
introduction of the independent custody
model (ICM) will be another significant
development that will embed the role of a
specialist custodian. With time there will
be a wider array of tradable instruments
and the introduction of a depository
receipts, which are something that has
been under consideration.
Shahrur:Inmyopinion,expectationswill
be shaped by the reaction of local inves-
tors ahead of the actual implementation
of the new regulations next year. We have
already seen a sharp rally. If this is main-
tained, then this will eat greatly into the
caseforSaudiArabiafromavaluationper-
spective, though fundamentally this will
remain a high growth, very solid market.
If the rally subsides, then foreign inves-
tors will have more space to participate in
some of the strength and diversification
potential offered by the market.
Sillitoe: The other point is access of asset
managementcompanies.IthinktheCapi-
tal Market Authority (CMA) will have to
set up some sort of education programme
to make it easier for external investors.
A lot of our research is showing that for
international asset management compa-
nies the big topic now is obviously Saudi
Arabia – not just about trying to access the
capital markets but obviously to look at
how you can raise capital to use there. But
obviously that often now involves having
to have the relevant licence or partnership
with a CMA licensed business.
Then there is the practical point about
visits–theSaudiArabiangovernmentwill
have to look at easing the rules for visas
because if you are a fund management
company from New York hoping to ana-
lyse some of these companies, the current
process is very difficult.
What does Saudi Arabia offer that
investors cannot get elsewhere in the
region?
Shahrur: The size and prospects of Saudi
Arabia’s consumer sector are very good.
Thereisabiginvestmentthemeregionally
around domestic consumer demand, but
there are a very limited number of liquid
companies in this sector elsewhere in the
region–maybearound10names.Soifyou
want to gain exposure to that sector, you
can almost strictly achieve that in Saudi
Arabia where you have a good number
of listed companies that are liquid. Also,
apart from its fundamentals, this sector
exhibits a lower correlation with interna-
tional markets than other big sectors in
the region.
So, for someone sitting in New York,
petrochemical companies may be inter-

esting but they are highly correlated with
internationalmarkets.Butforafoodbusi-
ness in Saudi Arabia for example, the low
correlation means you can diversify your
risk while giving you a good exposure to a
growing regional sector.
What are the prospects for the initial
public offering (IPO) market in the
region?
Claus Nouveau-Nikolajsen: From the
merchant banking side, we definitely see
a trend where some of the typical family
offices in the UAE are maturing and look-
ing to list. We have perhaps 14 or 15 offices
thatareconsideringthiscurrently.Thisall
means that they are opening up and con-
sidering in more detail the governance
they need to be able to warehouse inside
the group and the family for a listing to
work. I think the first family IPO that is
going to be interesting is this year’s launch
due to happen out of Dubai Al Habtoor.
From a UAE point of view, this is a key
move because it will open up the doors for
many others. It was a shame there was a
slight delay in the process earlier this year
– I think it created some negative impact
on some other families that were trying to
follow on and IPO themselves. Then you
have the whole institutional side of the
market.Herethereisalongwaitinglistfor
companies, with structures to go IPO and
this is certainly good from a global invest-
ment point of view.
The danger is
that if there are
set backs – such
as the one we have
seen this year –
the result can be a
lot of concern for
those waiting to
IPO. I think there
needs to be a big
emphasis on edu-
cation about what
happens when
firms IPO – you
can change shareholder structures, you
can buy out, you can sell out, but you have
to do it in the proper way.
Ansari: I think Claus [Nouveau-Nikolaj
sen] has a good point when he focuses on
education and it is relevant to the range of
structures that can be offered. The point is
that the predominant type of investor in
this region is the retail investor. In Saudi
Arabia the retail investor is approximately
95% of the market. They have two types
of asset to invest in basically – real estate
and equities. Before investors look at new
types of products and investment vehicles
“The size and
prospects of
Saudi Arabia’s
consumer
sector are very
good”
Husayn
Shahrur,
NBK Capital
“We understand
that the regulatory
authorities in
the kingdom
have adopted
a consultative
approach towards
opening of the
market”
Hammad Izz-e-Hamid,
Deutsche Bank

they need to understand the benefits of
these alternative routes to get exposure.
Shahrur: At the origin of this is that a
number of the IPOs in the region are gov-
ernment assets, and are done with the
intention to redistribute these assets or
wealth to the public. Also, many of these
companies fall within subsidised indus-
tries with lower energy and feedstock
costs, like the case for the petrochemi-
cals and cement sectors in Saudi Arabia.
So, one way to have everybody benefiting
from the subsidy is to intentionally offer
theIPOtonationalsatapricesignificantly
below the theoretical fair price. We have
seen these IPOs usually rally by 100% on
the day of issuance.
By contrast, a family business that is not
benefitingfromanysubsidyfindsithardto
compete with the steep discounts offered
by these IPOs in order to attract potential
investors. A related factor that prevents
these families from listing is that they are
not clear what options exist regarding
what they can do with the money they will
potentially raise. Also, a lack of integrated
regional markets impedes cross-border
investment and limits investment oppor-
tunities. For example, a UAE company
thatwantstogrowtoothermarketswithin
the region – not even globally – faces so
many obstacles.
Moreover, regulations in some markets
are quite inhibitive – the Dubai Finan-
cial Market (DFM) comes to mind in this
respect.Similarly,privateequityfunds,for
reasons largely related to pricing and reg-
ulation, have shied away from IPO exits.
Kumar: With valuations and liquidity
wheretheyare,itisprobablytheidealtime
to IPO now. When you look at Qatar, the
governmenthasannouncedIPOsofabout
$50bn over the next five years, it is about
$10bn per year, and for a market of this
size it looks very attractive and useful.
The problem with IPOs that are part of
a government unbundling of assets is that
it is saddled with restrictions that prevent
fair price and symmetry. It is fair for gov-
ernmentstounbundleassetstoitscitizens
at a discount, it is both good and desira-
ble, however after it is listed it should be
allowed to be freely traded so that its true
value may be realised and the benefit of
listing is enjoyed by all the stakeholders in
the capital market.
When it comes to the family houses, I
agree with the argument that the govern-
ance is bad and that is one of the reasons
holding it back. There has not been much
success in terms of the free float these
companies have enjoyed since listing. The
second factor is that most family houses
business are floated as conglomerates
that have five or 10 different kinds of busi-
nesses in them.
When you put a lot of small businesses
all bundled up together this way and then
offered, there is no business model per se
that investors can look at. It is hard to be
confident of the management’s capability
to oversee 10 different businesses given its
governance track record.
How do you evaluate the political risk
ofinvestingintheMiddleEast?Hasthe
importance to investors of political risk
changed?
Das: This region is no stranger to political
turbulence – sometimes there is more of
it, sometimes there is less. The problems
recently in Iran and Syria have not hit the
markets in UAE or Qatar as much as they
might have done. The focus this time has
been on issues directly affecting the spe-
cific country being traded, not necessarily
around what happens around the periph-
ery. And the Middle East is not the only
place with political risk – just look at the
European situation or what is happening
in Ukraine. We are not living in an oasis
of calm.
Kumar:Politics will become more impor-
tant as foreign investor stakes in these
markets increase. The perception of
risk in, say, Qatar is different I think for
a fund manager sitting in New York sev-
eral thousand miles away from a domestic
institution. He is probably more sensitive
to it – if the market is largely domes-
tic, which is the case for Saudi Arabia or
Qatar, the risk is probably not considered
as high as when foreign investors become
a dominant force in the market.
Does a Dubai-Abu Dhabi Bourse
merger make sense?
Ansari:There have been comments in the
press about combining the back offices of
the Abu Dhabi Exchange and the DFM,
with the front offices still functioning sep-
arately. When the outside world looks at
the UAE it do not necessarily appreciate
that there are two distinct exchanges and
if it does not necessarily impact interna-
tional investor habits with the respect to
“Inflow into has been far higher than what analysts expected. In
the period May to June, we saw assets in our custody increase by
more than $3.5bn”
Arindam Das, HSBC

the market one could argue to keep them
as they are.
Claus: A certain amount of liquidity
needs to come back to the market, and the
merger between the two exchanges would
facilitate that. I see it as part of this wider
theme of market maturity. There is much
more these exchanges can bring to the
market and I think they should start being
more open about how they are working.
Izz-e-Hamid: The merger of the two
exchanges may be an important develop-
ment in itself. However, what is perhaps
more pressing in terms of need is the har-
monisation of practices and procedures at
an operating level. Standardisation, – for
example, across administrative tasks such
as investor registration – may ease of mar-
ketentrytoforeigninvestorsandavoidthe
duplication of efforts. Further, alignment
of the framework for regulations and set-
tlement processes may bode well for all
marketparticipants.Intermsofourwork-
ing experience, the regulatory authorities
are mindful of the reforms that will bring
about synergies and add scalability, aimed
to make it easier for investors and inter-
mediaries to operate across the markets.
Qatar has said it needs $220bn of
investment for the World Cup. Are
investors keen to provide it and will
they be adequately rewarded for the
risk they take on?
Claus: Qatar does need quite a lot of capi-
tal. The government commitments will
ultimately be more than sufficient to meet
it but there will be some private sector
participation. However, when you look at
thequestionofwhetherinvestorsareactu-
ally being rewarded for taking on this risk
I think the general point is no. The UAE,
which is probably the largest borrower in
the region, has seen its spreads narrow
from 500bps [over treasuries] to around
150bps. Absolute rates, at about 4%, are
the lowest since 1960.
So when you look at all this you have to
say that now you have so much liquidity
being pumped into the market and spread
figures that are consistently dipping over
the years. So, no, I do not believe that
investors have been adequately rewarded
for the risk they are taking on.
Isparticipationbyforeignassetmanag-
ers in the Middle East increasing?
Sillitoe: International asset management
companies are interested in the region
and particularly in UAE. One question
frequently asked is: “Which is the finan-
cial centre of the Middle East. Dubai?
Abu Dhabi? Bahrain? Saudi Arabia?” In
Dubai, I am still staggered by how many
companies are either setting up here for
the first time or are expanding their oper-
ations. If you look at every global asset
management company that is physically
in the GCC region, there are only five that
arenotrepresentedinDubai.Thatisquite
a staggering statistic.
It is also worth bearing in mind that
every GCC jurisdiction has a slightly dif-
ferent appeal to businesses and that each
jurisdiction itself has different priorities
aboutwhatthetypeofbusinessandinvest-
ment it is looking to attract. In Qatar, for
example, the government is providing
a regulatory framework and incentives
to hedge fund managers to set up there.
Qatar is also the only regulatory author-
itywhichhassofarintroducedmandatory
commission disclosure by retail financial
intermediaries.
Across the region we are seeing posi-
tive signs that regulatory standards are
being raised. Lessons are being learned
from current regulation and legislation in
what might be perceived as more mature
markets of the US, Australia and Europe.
As the financial markets of the Middle
East develop, individual governments are
making it clear that they will not be left
behind when it comes to good governance
processes. g

GLOBAL CUSTODIAN
Citi
Technology is at the centre of its strategy to deliver
to clients
The core focus of Citi’s Mena global custody solution over the
last two years has been on the development and build-out of its
dedicated Middle East global window, where assets under cus-
tody have exceeded $2bn and are expected to exceed $3bn by the
end of 2014.
This global custody window is designed to focus on Middle
East-based clients investing into Mena markets. It covers the
workinghours/weekoftheMiddleEastforthesecuritiesmarkets
and associated treasury functions required to support investors
focusing on the region with local delivery.
Otherdevelopmentsduring2014includethedevelopmentand
roll-out of the Auto-FX Global Custody FX solution and EMC,
a corporate action and income integrated solution. Citi is also
expanding its branch network, adding Bahrain, Kuwait and the
UAEinrecentyearswiththeexpectationthatQatarwillbeadded
in 2014. It also has plans to open in Jordan, Saudi Arabia and
Iraq.
Citi’sMiddleEastglobalcustodysolutionfeaturesasinglecon-
tractual structure via Citi UAE, Middle East-based relationship
manager and client executive and customer services, UAE-
based product management, GCC-based centralised operations
covering settlements, corporate actions, income, tax and other
operations roles, Arabic-speaking customer service representa-
tives, GCC-based coverage including Sunday and GCC holidays,
and advanced cut-off times.
TechnologyforservicedeliveryremainsattheforefrontofCiti’s
strategy.ItsinvestorservicesglobalcustodysolutionsintheMid-
dleEasthavefurtherintegratedthedeliveryofglobalcustody,for
regional and global markets, with cash management and treas-
ury capabilities through a single onshore entity domiciled in the
UAE. This service provides clients with a single point of contact
for all their custody, asset servicing and wider banking needs.
Citi combines local client service with locally-based product
platforms and operations to provide an offering that is sensitive
tomarket-cut-offtimes,theregionalworkingweekandlocalcus-
tom. It also provides shariah-compliant cash solutions to service
the needs of its Islamic client base. Citi’s Auto-FX product pro-
vides clients with significant capabilities for the automation of
FX transactions with competitive spreads, real time pricing and
automated settlement.
SUB-CUSTODIAN
HSBC
HSBC has been engaged with multiple regulators to
improve rules and processes
HSBC has assisted the smooth transition of the UAE and Qatar
markets into MSCI Emerging Markets status through a number
ofinitiatives.Theseincludeenhancedprocessingcapabilitiesand
increasing its guarantee at exchanges, settlement lines for clients
andoffshoreandonshoreresources.HSBCalsoledlocalworking
groups that included the exchanges, depository and brokers to
create awareness, engaged with clients before, during and after
the upgrade to ensure awareness of local processes and latest
markets developments and worked with the central depositories
to improve timelines for account opening and the waiver of pen-
alties during the conversion week.
HSBC Qatar’s engagement with the Qatar Exchange led to the
implementation of the direct dividend credit process to share-
holders’ cash accounts. At least 90% of the companies in Qatar
now opt to pay dividends via wire transfer, thereby providing
clients with the early use of funds. HSBC was engaged with the
UAE’s regulators ahead of its decision to introduce a law to pro-
vide clients with the ability to sell their rights. Kuwait Clearing
Company agreed to HSBC Kuwait’s initiative to pay dividends
electronically rather than by cheque. Once this process is imple-
mented, it will help clients receive their entitlements in a more
timely fashion.
HSBC extension of the existing multi-managed fund operat-
ing model to cover multiple global custodians on top of multiple
fund managers has helped investors achieve efficient settlement
by enabling multiple global custodians to instruct on behalf of
several fund managers trading on the same national investor
number.
Assets have grown by approximately 50% since 2013 and
there has been growth of more than 40% in transaction volume.
HSBC won more than 30 custody mandate across nine countries
between June 2013 and June 2014 and despite volume peaks
from 2013 – average 2000% in Qatar and 1600% in UAE – was
able to handle, without any disruptions in service delivery or
operational flows, the MSCI upgrade for both countries.
ProductinnovationsincludeAccountTracker,atooltomanage
andtrackaccountopeningdocumentationprocessingandstatus.
In November 2013 HSBC implemented the 2013 Swift standard
release and it has also improved its market information portal to
enable comparison of market features side-by-side and enhance
the market holiday calendar.
HSBC Oman provided feedback to Muscat Central Deposi-
tory about implementing the new depository system and the
introduction of delivery-versus-payment (DVP) and is working
with the Egyptian Depository to enhance a proposed DVP model
across the whole market, which is expected to be launched before
the year end.

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