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Thematic strategies will pay off in the long run: Global Investment House

Thematic strategies will pay off in the long run: Global Investment House

Having first gotten a taste of the industry at an internship with UBS, Faisal Al Othman has since gone on to take on the role as vice president of international asset management at Global Investment House.

Al Othman gives Citywire Middle East the scoop on the strategies that have worked well over the past year, the themes that he is looking out for, as well as why ESG has not seen a bigger pick-up in the region.

Q: Tell us about your team and your role.

A: My team offers tailored portfolios that leverage the company's suite of front and back office services.

We cater to the needs of high-net-worth and institutional clients by actively managing, monitoring and reporting on their investment portfolios.

Our services include portfolio construction, asset allocation, manager assessment, aggregation and client reporting.

Q: How did you get started in the industry?

I started by joining the Kuwait Investment Authority (KIA) Fresh Graduate Trainee programme. It’s an intensive training programme of more than 30 courses in finance and finance-related topics, followed by an internship at a leading global financial institution.

In my case, my internship was at UBS, Zurich and London, where I focused on portfolio risk management. 

I was then selected to join the American Investment Department of KIA, which oversaw the management of balanced portfolios invested in North American capital markets.

Q: What investment sectors and funds have been popular with clients over the past year?

A: The most popular has been long-only developed market equity strategies, as the significant pull-back at the end of 2018 provided attractive opportunities to deploy capital.

This has paid off as the performance of those funds has been resilient for most of the year. We are cautious at this point and have expressed this to our investors.

Q: Can you describe any specific calls that have paid off?

Our belief in navigating the market through thematic strategies. For example, artificial intelligence (AI) and automation.

We believe that these themes will continue to pay off over the long run, but we also must note the volatility attached to such themes.

Q: What are essential traits for a fund manager?

A: Consistency, whether in performance or on strategic and structural bases.

Application of risk management processes that have been proven through multiple market conditions and, preferably, through multiple market cycles.

Transparency through consistent communication with investors. Ownership of any situation, good or bad. 

Q: What do you expect from foreign fund managers you work with?

A: I expect that they deliver the best and a consistent real rate of return or risk-adjusted return, as we expect the same of the portfolios we manage.

Q: Are there any types of fund products you would like more access to in the region?

A: Sharia-compliant buy-and-maintain fixed income strategies. These are generally reserved for large separately-managed accounts with big institutions, but I would appreciate seeing investment vehicles established for such a strategy.

Investors in the region are and have always been attracted to yield, which is what this strategy offers. An adviser, such as ourselves, would be able to promote the yield at any given time, while at the same time offering a daily liquidity pricing. 

Q: How many funds are on your platform and how many fund groups do you work with?

A: We currently have approximately 120 funds on our platform across mostly liquid or semi-liquid strategies.

We have a continuous monitoring mechanism that allows us to grow and maintain the platform deliver a diversified set of opportunities to our clients.

Q: Have you added new strategies this year?

A: Yes, we are constantly adding funds on our platform as our mandates dictate. We are also constantly on the lookout for high-quality strategies and fund managers that we monitor for possible inclusion to our platform.

Q: Is ESG a concern for clients?

A: Not as much as we would like, but we believe that interest will increase in due course. It is understandable as the region is primarily a group of oil exporting economies. Currently, most investors focus on the ‘SG’ versus the entire ESG.

Q: If you could ask a fund manager just one question, what would it be?

A: Is your personal wealth and the team’s wealth invested in the fund?

Q: Do you work with many alternative managers?

A: We work extensively with alternative managers, but due to the long running bull market in equities and bonds, their returns have been lacklustre when compared to their long-only peers.

Lack of volatility in the market hasn’t helped alternative managers either. We will increase our exposure to alternatives, as we firmly believe that volatility is coming back to global markets and alternatives will surely benefit.

Q: How can regulatory authorities further facilitate the growth of the mutual funds industry?

A: I firmly believe that regional regulators are the fastest evolving regulators globally. That being said, their primary focus has been on the local exchanges versus the activities of foreign fund managers in the region.

We are heavily regulated and take pride in meeting all our regulatory requirements under the rules and regulations of the Kuwait Capital Markets Authority and other regulators in the jurisdictions in which we operate.

Promoting an attractive way for foreign fund managers to navigate the region through licensed and regulated entities will increase the quality of the opportunities that are presented to investors here.

This in turn would most definitely increase the appeal for mutual funds by regional investors. 

Q: Do you have any reading recommendations?

A: The Silk Roads by Peter Frankopan.

This interview was first published in Citywire's 2019 Middle East Selector supplement.