The Fund will invest primarily in shares and other securities issued by companies established or operating in GCC and MENA countries and other countries approved by the Founder and Fund Manager. However, the Fund Manager will have the flexibility to invest in initial public offerings of shares of companies in these countries, money market and fixed income instruments, bank deposit accounts, sovereign bond issues of GCC countries, other funds and unit trusts both investing predominantly in securities of companies listed on Qualifying Exchanges. An unspecified percentage of the Fund's Net Asset Value will be held in the form of cash so as to facilitate new investments by the Fund or redemption of Units.
|Fund Manager||Amwal LLC|
|Fund Founder||Doha Bank Q.S.C.|
Talal Samhouri, CFA
|Administrator and Custodian||HSBC Bank Middle East Ltd|
|Auditors||Ernst & Young Qatar|
|Inception Date||September 2013|
|Management Fee||1.50% p.a.|
|Performance Fee||15% Over 10% Hurdle Rate|
"Al Hayer GCC Fund is unique in that it invests in the GCC and Mena markets and aims to deliver above average returns with below average risk through investing in a diversified and carefully selected portfolio of companies across major market sectors."
The Saudi market continued to be the worst performing stock market in the region, and this month it was followed by the Qatari Market, both declining during the month by 7.5% and 5%, respectively. Declining oil prices, negative news flow from the Saudi construction sector and harsh austerity measures in Saudi Arabia had a negative impact on the path of GCC markets. But by end of the month a positive surprise occurred in Algeria about OPEC's promise to cut production for the first time since 2008.
For Al Hayer Fund, we have continued increasing the cash allocation to about 13% as markets continued its decline. We have also reduced exposure to the Financials sector to about 39% from about 47%, since the sector, especially in Saudi Arabia, will be the hardest hit in the event of increased defaults in the system. While at the same time, we have diversified into consumer staples, chemicals and telecom, taking a defensive stance in anticipation of a dismal 3Q results.
Despite the heavy losses the Saudi market has exhibited this year, we believe that over the next few months it will recoup 2016 losses, as clarity increases on government measures and stability of oil prices in the range of $45-55 per barrel.
Regional equities continued their sell-off in May with the fund's benchmark S&P GCC Large Cap Index declining -5.2%. In comparison the Al Hayer GCC Fund declined -4.5% (net after fees and expenses) during the same period.
Despite oil price recovering to about US$ 50 per barrel of Brent towards the end of May, we find the continued drop in GCC stocks related primarily to future prospects of government spending. Saudi Banks and real estate in general were among the worst hit, declining around 8-10%.
In brief we see current levels as quite attractive to selectively increase investment in GCC equities. We will shortly be publishing a more detailed report sharing our analysis on valuations, prospects and risks.