Press Room
Al Mal and Shuaa emerge with the least losses
Posted on 30 Oct 2008
October 25th 2008
Al Mal and Shuaa emerge with the least losses
The drop in stock prices results in losses at some investment funds reaching 40%
By Samir Hammad
Abu Dhabi – The past nine months witnessed a 40% drop in the NAV (Net Asset Value) of local investment funds influenced by the sharp decline in Abu Dhabi and Dubai financial markets where securities, however inexplicably, lost value particularly in the third quarter of the current year.
Performance results of six local investment funds showed a drop in NAV of various percentages, most of these funds declined more than the decline shown by local financial markets indices. In the first 9 months of 2009 the Securities and Commodities Authority Index decreased by 21.19 % whereas the Dubai General Index decreased by 30% and Abu Dhabi decreased by 13%.
The decrease in the four of the funds exceeded 30%. The NBAD Growth Fund witnessed the largest decline at 39.3% followed by the ADCB Al Nokhitha Fund which decreased by 33.12%. Meanwhile, the NBAD Trading Fund decreased by 32.18% and the Mashreq Bank Makaseb Fund declined by 32.7%.
The funds of Al Mal Capital and SHUAA Capital emerged with the least declines, whereby both funds could, during the past nine months, limit their losses to 12.75% and 27.77% respectively.
Mr. Adel Al-Hosani the fund manager of the UAE Equity Fund at Al Mal Capital, attributed the fund’s success in diminishing its losses, by not focusing on securities mostly traded and held by foreign investors, noting that the percentage of such securities in the portfolio was “very low”.
The listed companies with the highest foreign ownership levels suffered greater losses than those companies which do not allow foreigners to possess their equities or even those allowing minor foreign ownership
“For us,” Al-Hosani added, “We anticipated a decline, therefore, we worked to liquidate half of our portfolio in order to use the cash to repurchase shares later on when prices reach lower levels. However, we received redemption requests from clients leaving us with no option but to settle these requests.”
Mr. Haitham Urabi, Head of Asset Management, SHUAA Capital, agreed with the points made by Mr. Al-Hosani, Mr. Urabi also added that the success in controlling the losses, compared to market indices, resulted from a move to cash and abstaining from further purchases at low prices even at the peak of the decline.
Urabi noted the dramatic effect that investor withdrawals had on the market, this is clear by looking at the decline in the fund Assets Under Management.
The success of SHUAA Capital and Al Mal Capital in reducing their losses by holding significant positions in cash, is however the reason behind the significant losses suffered by NBAD funds. Mr. Ziad Al Dabbas, an advisor at NBAD asserted that the investors’ withdrawal had a far reaching impact on the cash available in funds which has left the fund managers no option but to liquidate their securities to settle the accounts of their clients.
The reports issued by the fund managers summarizing holdings and results as of the end of September showed that the cash position in the UAE Equity Fund at Al Mal Capital stood at 12.8% compared to 2.59% for SHUAA Capital followed by 0.2% for Mashreq’s Makaseb Fund.
Whereas, the holdings summary of the funds of the National Bank of Abu Dhabi and Abu Dhabi Commercial Bank did not show any liquid cash in their investment portfolios, which was a further reason for their poor performance.
In this regard, Al Dabbas pointed out that financial markets usually have funds that adopt two mechanisms; the first is a closed-end fund and operated with a term investment purposes for one, two or more years, whereas the other is an open-end fund allowing for exchange of units on daily, weekly or monthly basis. The latter was more severely affected on account of the liquidation options available for customers.
According to Al-Hosani, Al Mal liquidated its assets in the companies that were exposed to financial wrongdoing or suspicions which ended in formal investigations.
In the last two months, a number of joint-stock companies in the Dubai market were exposed to suspicions of corruption where the suspects are undergoing investigations by the Emirate’s competent authorities.
“We focused our investments on investing in equities different from the holdings of other funds and, at the time being, would turn to companies supported by the government,” Al-Hosani added.
Al-Hosani also noted that most fund managers’ chiefly focus on leading market securities such as “Etisalat” and “Emaar” as key equities representing more than 25% of their portfolio weighting.
In the same context, Al Dabbas noted that investment funds usually take into consideration two criteria in terms of investment decision making. The first criterion focuses on the industry of the companies picked by fund managers to be among their fund holdings. Unfortunately, the listed companies with the highest volume traded on the exchange suffered the largest share price declines. The second criterion is represented in selecting companies with good liquidity on the exchange combined with the least weighting on the market index.
Al Dabbas also remarked that the markets are currently unstable and that it is difficult for an individual investor to predict market movements due to the fact that markets are influenced by external factors more than internal ones at this time. On the other hand a fund manager focuses on key factors and proper analysis of a company.
On the other hand, Mr. Al-Hosani seemed optimistic about the future and expressed that the market has reached a stage where purchases are profitable in the long run.
He added, “In the coming three months the external factors we have seen will no longer have an effect on the markets, because many equities are now being traded at about or below their book values and others at about their par values.”
Though Urabi agrees with Al-Hosani on the upcoming months, as a time for share prices to settle close to current levels, Urabi believes that the movement of the local market movement will still be affected by what happens in the USA.
Al Mal and Shuaa emerge with the least losses
The drop in stock prices results in losses at some investment funds reaching 40%
By Samir Hammad
Abu Dhabi – The past nine months witnessed a 40% drop in the NAV (Net Asset Value) of local investment funds influenced by the sharp decline in Abu Dhabi and Dubai financial markets where securities, however inexplicably, lost value particularly in the third quarter of the current year.
Performance results of six local investment funds showed a drop in NAV of various percentages, most of these funds declined more than the decline shown by local financial markets indices. In the first 9 months of 2009 the Securities and Commodities Authority Index decreased by 21.19 % whereas the Dubai General Index decreased by 30% and Abu Dhabi decreased by 13%.
The decrease in the four of the funds exceeded 30%. The NBAD Growth Fund witnessed the largest decline at 39.3% followed by the ADCB Al Nokhitha Fund which decreased by 33.12%. Meanwhile, the NBAD Trading Fund decreased by 32.18% and the Mashreq Bank Makaseb Fund declined by 32.7%.
The funds of Al Mal Capital and SHUAA Capital emerged with the least declines, whereby both funds could, during the past nine months, limit their losses to 12.75% and 27.77% respectively.
Mr. Adel Al-Hosani the fund manager of the UAE Equity Fund at Al Mal Capital, attributed the fund’s success in diminishing its losses, by not focusing on securities mostly traded and held by foreign investors, noting that the percentage of such securities in the portfolio was “very low”.
The listed companies with the highest foreign ownership levels suffered greater losses than those companies which do not allow foreigners to possess their equities or even those allowing minor foreign ownership
“For us,” Al-Hosani added, “We anticipated a decline, therefore, we worked to liquidate half of our portfolio in order to use the cash to repurchase shares later on when prices reach lower levels. However, we received redemption requests from clients leaving us with no option but to settle these requests.”
Mr. Haitham Urabi, Head of Asset Management, SHUAA Capital, agreed with the points made by Mr. Al-Hosani, Mr. Urabi also added that the success in controlling the losses, compared to market indices, resulted from a move to cash and abstaining from further purchases at low prices even at the peak of the decline.
Urabi noted the dramatic effect that investor withdrawals had on the market, this is clear by looking at the decline in the fund Assets Under Management.
The success of SHUAA Capital and Al Mal Capital in reducing their losses by holding significant positions in cash, is however the reason behind the significant losses suffered by NBAD funds. Mr. Ziad Al Dabbas, an advisor at NBAD asserted that the investors’ withdrawal had a far reaching impact on the cash available in funds which has left the fund managers no option but to liquidate their securities to settle the accounts of their clients.
The reports issued by the fund managers summarizing holdings and results as of the end of September showed that the cash position in the UAE Equity Fund at Al Mal Capital stood at 12.8% compared to 2.59% for SHUAA Capital followed by 0.2% for Mashreq’s Makaseb Fund.
Whereas, the holdings summary of the funds of the National Bank of Abu Dhabi and Abu Dhabi Commercial Bank did not show any liquid cash in their investment portfolios, which was a further reason for their poor performance.
In this regard, Al Dabbas pointed out that financial markets usually have funds that adopt two mechanisms; the first is a closed-end fund and operated with a term investment purposes for one, two or more years, whereas the other is an open-end fund allowing for exchange of units on daily, weekly or monthly basis. The latter was more severely affected on account of the liquidation options available for customers.
According to Al-Hosani, Al Mal liquidated its assets in the companies that were exposed to financial wrongdoing or suspicions which ended in formal investigations.
In the last two months, a number of joint-stock companies in the Dubai market were exposed to suspicions of corruption where the suspects are undergoing investigations by the Emirate’s competent authorities.
“We focused our investments on investing in equities different from the holdings of other funds and, at the time being, would turn to companies supported by the government,” Al-Hosani added.
Al-Hosani also noted that most fund managers’ chiefly focus on leading market securities such as “Etisalat” and “Emaar” as key equities representing more than 25% of their portfolio weighting.
In the same context, Al Dabbas noted that investment funds usually take into consideration two criteria in terms of investment decision making. The first criterion focuses on the industry of the companies picked by fund managers to be among their fund holdings. Unfortunately, the listed companies with the highest volume traded on the exchange suffered the largest share price declines. The second criterion is represented in selecting companies with good liquidity on the exchange combined with the least weighting on the market index.
Al Dabbas also remarked that the markets are currently unstable and that it is difficult for an individual investor to predict market movements due to the fact that markets are influenced by external factors more than internal ones at this time. On the other hand a fund manager focuses on key factors and proper analysis of a company.
On the other hand, Mr. Al-Hosani seemed optimistic about the future and expressed that the market has reached a stage where purchases are profitable in the long run.
He added, “In the coming three months the external factors we have seen will no longer have an effect on the markets, because many equities are now being traded at about or below their book values and others at about their par values.”
Though Urabi agrees with Al-Hosani on the upcoming months, as a time for share prices to settle close to current levels, Urabi believes that the movement of the local market movement will still be affected by what happens in the USA.