Gulf Investment Fund’s new strategy is in place – During the 12 months period to 30 June 2018, Gulf Investment Fund (GIF)‘s NAV per share rose by 7.8%. The S&P GCC composite index and the MSCI Emerging Markets index returned 8.6% and 5.8% respectively. Following a narrowing of the discount to NAV, the shares rose by 13.0%.
The report goes into a large amount of detail about the investment strategy, comment on individual markets and outlook but gives very little detail on how the performance was derived.
In December the fund’s investment strategy and name were changed. The widening of the company’s investment universe and the benefit of strong economic growth across the Gulf region has led to improved performance for the fund’s net asset value and share price. It had been focused on Qatar and now has a remit that allows it to invest across the markets of the Gulf Cooperation Council (GCC) in the Middle East. The member countries of the GCC are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Related states include Egypt, Iraq, Iran, Jordan, Morocco and Yeman.
The chairman of the company, Nicholas Wilson commented that the company is confident that this growth will continue to provide opportunities for the company in the region. At the year-end the portfolio held positions in the financial services, energy and utilities across Saudi Arabia, Qatar, Kuwait and the United Arab Emirates and the company’s investment adviser believe that medium to-long term growth prospects should remain healthy across the region, driven by a strong infrastructure development pipeline, supportive demographics as populations increase and as stock markets in the region are upgraded to emerging market status.
Investment Objective and Strategy
The company’s investment objective is to capture the opportunities for growth offered by the expanding GCC economies by investing in listed companies on one of the GCC exchanges or companies soon to be listed on one of the GCC exchanges. The company may also invest in listed companies, or pre-IPO companies, in other GCC related states.
The company applies a top-down screening process to identify those sectors which should most benefit from sector growth trends. Fundamental industry and company analysis, rather than benchmarking, forms the basis for both stock selection and portfolio construction.
Previously, the investment policy enabled the company to invest up to 15% in GCC countries (namely Saudi Arabia, Kuwait, UAE, Oman and Bahrain) other than Qatar. The proposed change in investment policy removed the 15% limit and enabled the company to increase its investment allocation to other GCC countries and provide the investment adviser with a wider investment universe and more flexibility to identify attractive opportunities in the GCC region.
At the end of the period, the portfolio was made up of 43 holdings: 24 in Saudi Arabia, 9 in Qatar, 5 in the UAE and 5 in Kuwait. The geographical split based on valuation, was Saudi Arabia 39.2%, Qatar 36.7%, Kuwait 10%, and UAE 9.6%. The portfolio also had 4.5% in cash.
GCC Outlook
The company writes that the GCC nations are adapting to changing global economic conditions, but challenges remain, including relatively high local unemployment in certain states, a heavy reliance on expatriate workers, and the ongoing dependency on the government sector to drive growth. They go on to say that “diversification and reducing the budget deficits are positive developments. If GCC companies can weather the near-term impacts of the many government reforms that are underway, they could outperform global peers in the near to medium term.”
GIF : Gulf Investment Fund’s new strategy is in place