Cerulli Global Edge: Middle East special edition, March 2013

Cerulli Global Edge, March 2013

INTERNATIONAL MODELS FOR ASSET MANAGEMENT IN THE MIDDLE EAST

The standard operating model for international asset managers in the Middle East looks like this. Three people in a small office, probably within the Dubai International Financial Centre, two of them in sales and one in support. No on-the-ground asset management presence, nor any real aspirations of developing one. A potentially large call list of family offices and promising nascent pension funds or endowments, but in reality a business utterly dominated by a pool of sovereign wealth funds that can be counted on the fingers of one hand. Every cent that’s garnered here is booked back in London or some other financial centre outside the Middle East.

There are exceptions, in two extremes, from the handful that have built asset management presence on the ground investing in the Gulf, to those who don’t even have a permanent desk in the region and instead run the whole operation out of London and Geneva and spend a lot on flights. But the mean, unquestionably, is the one described above: a modest foothold established in order to attract sovereign wealth in order to manage it elsewhere.

To see the illustrations referred to in the text, contact Cerulli Associates for the full report

This is not how the market was expected to appear when people looked ahead in 2007, as local stock markets and economies boomed, and the DIFC simply could not be built fast enough to deal with the waiting list of foreigners wishing to set up within it. Back then, it was expected that the sales offices would steadily expand to local asset management, and that the region would become gradually more important to international asset managers with every passing year.

Two things went wrong: one, the world fell apart, and two, so did the Gulf. As global fund managers had to focus on problems at home in the USA and Europe, they tended to pull back satellite or fledgling operations. At the same time, global institutional managers pulled assets away from perceived risk and into safe havens. The Middle East appeared immune to the gathering global financial crisis for about a year, but when it did hit, it hit hard, and nowhere harder than Dubai, where a real estate bubble burst, the Emirate went to the brink of default, and what little money that had remained in the region fled for the exits.

Today, though, things are calmer, both within the region and among the home nations of world investors, and asset managers are once again considering the region and trying to establish a long-term strategy.

A small number maintained an asset management presence throughout, but it is instructive to note how even this small number of models differ from one another. Probably the most entrenched is ING, which set out from the start with a fully-fledged investment management office and a model not just to export capital from the Gulf but to import it too. Then there is Templeton, which looks different again, having taken the interesting approach of buying a strong local boutique, Algebra Capital, which as of March 2012 no longer operates under its own name. (Templeton is also unusual in running a broader region encompassing Central and Eastern Europe from Dubai.) Then there are managers like Schroders, which keep a modest investment management presence in the region sufficient to manage a regional mutual fund. Even those that do have local funds don’t always book their assets in the region; almost everything that is raised in the Gulf promptly leaves it to be managed elsewhere. As fig 4 shows, the regional centre for the management of Gulf-raised funds is not Dubai, or Bahrain, or Doha, or Riyadh, but London.

It’s worth noting a couple of other interesting approaches, particularly in Qatar. The next chapter on sovereign wealth funds will look at this in more detail, but the Qatar Investment Authority is an organization that strongly favours direct investment, so that for asset managers, realistically the only way in is to co-invest with them. Two institutions, Barclays and Credit Suisse, have taken this approach over the last year, and their approaches are discussed in more detail in the next chapter.

For most managers, though, there is little sense in doing more than creating methods to take funds out of the Gulf.  Opinions vary on where best to do it from – Bahrain is the historical leader for foreign fund registration, Dubai’s DIFC is the most popular place to base people, and some, like Axa, have opted for Qatar – but in truth provided the sales team can reach the region’s clients, it barely matters where they are based.

But what should they offer? Mutual funds are discussed in more detail in the distribution chapter, and are in any case missing the point to an extent, since the mutual fund market is a tiny part of the asset opportunity in the Gulf. The real question is, what do sovereign wealth funds want?

Fig 3 shows just how important this is to any business in the Gulf. In our survey, sovereign wealth funds represented 76.6% of the investment opportunity for international managers, and many respondents said the figure for them was between 85% and 100%. Sovereign funds are so big that a single mandate can make the difference between an operation being viable and not. So getting the pitch right to the sovereigns – which is, to a large extent, really ADIA, the KIA and SAMA, since the QIA barely outsources – is consumingly important.

As the next chapter explains, many sovereign funds – and in particular the biggest, ADIA – operate a model in which much of their exposure is passive, with more active bets taken around the edges. In ADIA’s case, 60% of the portfolio tracks indices, and most of it is outsourced. So the first conclusion is that passive managers can run an extremely lucrative practice from the Gulf, albeit on razor-sharp fees.

Beyond that, it is widely understood that low-alpha active strategies are on their way out. There is simply no point in pitching a sovereign fund with a US equities strategy that pretty much tracks the index with just a few overweights here and there. ADIA in particular is enormously sophisticated, with 1,275 employees when last disclosed, and with high expertise in extremely specific sub-asset classes; active managers need to be able to demonstrate something different, and to work within a clearly defined core-satellite approach. There is a role here for bespoke products. “Five years ago, a sovereign fund would put out an RFP for a particular regional equity mandate and would appoint half a dozen managers,” says one fund manager. “Today, there’s much more one-to-one discussion. They’re looking for high alpha and it doesn’t necessarily drop into the traditional asset allocation buckets.”

In particular, all sovereign entities bar SAMA appear to value alternative investments, another trend common to sovereign funds worldwide. Hedge funds, private equity, infrastructure, real estate, and (particularly in Qatar) direct investment opportunities all stand a high chance of success. Some managers report increasing interest in these assets from family offices as well; this group is particularly keen on yield investments, and will participate in areas like senior secured loan vehicles that are not generally open to retail. There is also something of a sense of risk appetite returning: the annoying habit of mandates being awarded but not funded, a feature of the financial crisis, seems to have gone, and institutions are beginning to feel that they cannot sit on liquidity and must try to deploy it.

That said, there seems to be a difference between what people manage today and what they expect to in future. Fig 7 shows that our respondents were far more active in developed world equity than any other asset class, but fig 8 shows they expect the opportunities to arise in future in emerging market equity and debt. (The exceptionally low standing of developed world debt in respondents’ existing portfolios seems to support the contention that a lot of straightforward Treasuries-like investment has now been taken in-house.) This fits a widely understood theme: that sovereign funds are turning from west to east for new opportunities, finding better yield and often better fundamentals, as well as sometimes a better cultural fit.

Saudi Arabia is something of a special case when it comes to strategy, as several historical links between local and foreign banks exist, such as HSBC/Saudi British Bank, Goldman Sachs/National Commercial Bank (or its investment banking arm, NCB Capital), and ventures including Credit Agricole, BNP Paribas and ABN Amro. Naturally, the latter ventures have been particularly disrupted by the many changes in ownership among European banks in the last five years, while the whole picture has also changed because of a requirement that investment banking arms – which include asset management – be separate from commercial banks. The regulator that insisted on this separation, the Capital Markets Authority (CMA), has set about offering dozens of new licences to these investment banking businesses over the last few years, many of them to foreigners either working alone or with local partners. While it has been difficult for many of these to gain traction, there are already some instances in which foreigners appear to be focusing their Gulf strategy on a Saudi Arabian presence; anecdotally, Morgan Stanley is an example.

And even if managers aren’t focusing on Saudi today, they expect to. Perhaps the starkest single conclusion of our research is contained in fig 2, showing that Saudi is expected to be far and away the greatest opportunity for foreign managers in the Middle East over the next few years; the UAE, where ADIA is based, will remain important, but clearly methods of engaging more closely with Saudi will be key to success for international managers in the years ahead.

SOVEREIGN FUNDS AND THE INSTITUTIONAL MARKET IN DETAIL

While the MENA region is dominated by four sovereign wealth funds – the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the Qatar Investment Authority and the sovereign wealth elements of Saudi Arabia’s central bank, the Saudi Arabian Monetary Agency – it is not useful to think of them as a homogenous group. In fact they differ enormously in approach, history, risk tolerance and attitude to external managers.

The easiest to analyze is ADIA, partly because it is the biggest (though very few people know quite how big) but mainly because it is the only fund of its type in the region to have published an annual report – three, in fact, with the next likely to follow in June (or thereabouts; the previous one took until September.)  These days ADIA even goes so far as to press release big new appointments, most recently AllianceBernstein’s Gregory Eckersley as global head of internal equities, the Canada Pension Plan Investment Board’s Marc Keirstead as CFO for private equity, and private equity stalwart Colm Lanigan as head of principal investments.

One of the most useful parts of the ADIA report is its stated investment ranges by asset class. [please use ‘portfolio overview by asset class’ from p14 of 2011 report here]. Several things are striking: one, that up to 25% of the fund can go into emerging markets, in addition to up to 20% in developed Asia; and that emerging market equities can account for up to 20% of the portfolio; two, that alternatives in Adia’s definition can be 10% of the fund; and three, that what ADIA calls alternatives is just the hedge fund and managed future allocation  – so if infrastructure, private equity and real estate are added to the mix, then these non-liquid assets can account for up to 33% of the total. In all of these respects, ADIA is considered to be at the vanguard of broader sovereign wealth fund behavior; within the region, Kuwait is believed to be heading down similar lines, for example.

Perhaps the two most interesting numbers in the ADIA report – and they have remained consistent through all three reports to date – are that 80% of ADIA’s assets are outsourced to external managers, and that 60% of ADIA’s assets are in index strategies.  It is straightforward to see why an international asset manager might run a perfectly profitable Middle East business without ever leaving the UAE; if ADIA’s assets are, as widely thought, $500 billion or more, then that means $400 billion of it is outsourced. Moreover, it means that $300 billion of it is passive, and mostly outsourced.

The other three landmark entities of the region differ from ADIA in various respects. Probably the closest to it is Kuwait’s KIA, the oldest in the region, and unusual in being accountable to a vocal and vibrant parliament. It has prioritized investments in emerging markets and alternatives in recent years, as well as thematic trends such as scarcity and the environment.

SAMA in Saudi Arabia behaves like a central bank, largely because it is a central bank, just one that happens to have some of the responsibilities of a sovereign wealth fund. Consequently it is known for its conservatism and its heavy allocation to fixed income instruments and particularly treasuries. (Notably, this means that the key institution in the most conservative Muslim state in the world does not invest in a Shariah-compliant way, as interest-bearing securities are not Islamic.)

There is a separate sovereign wealth entity in Saudi Arabia, called Sanabil, launched in July 2008 with SAR20 billion in assets with an initial focus on technology assets, but it baffles asset managers in the region who report it never quite seems to get started. It hired Morgan Grenfell Private Equity’s Scott Lanphere in 2011, only for him to leave a month later, and now has former Canada Pension executive John Breen as head of direct investments, but nobody is yet reporting many mandates coming from it. KAUST, the endowment fund of the King Abdullah University of Science and Technology outside Jeddah, with former World Bank pension director Gumersindo Oliveros at the helm, is making some interesting investments, but in terms of pure sovereign wealth, fund managers continue to have to pitch staid and formal SAMA for the moment.

Qatar is in every respect the region’s outlier. The QIA is brasher, more aggressive and more outspoken than its peers. Also, it is far more heavily reliant on landmark direct investments, frequently in iconic real estate, than in a balanced portfolio of equity, debt and other investments. This has significant consequences for asset managers, as it means the QIA outsources almost nothing. This is no doubt disappointing for managers who had set up in Qatar in the hope of anchoring a regional business from the state, although in practice it is as easy to service neighbouring sovereign funds from there as from anywhere else. If Qatar really wants to become a centre for asset management, it could do with its sovereign fund behaving with a little more largesse towards external managers.

Instead, the way to work with Qatar is to set up asset management joint ventures. Two of note have been announced so far. The first, in April 2012, involved Qatar Asset Management Company (which is backed by the QIA and the Qatar Financial Centre Authority) setting up a venture with Barclays Natural Resources Investment, a private equity business. Through this, Qatar put $250 million into BNRI’s portfolio companies, current and future, and in turn the BNRI office for the Gulf is to be based in the QFC. Then, in November, Credit Suisse formed an asset management company with Qatar Holding, the international arm of the QIA (that is, pretty much all of it). This venture will be called Aventicum Capital Management and will operate out of two hubs, of which one will be Doha. Shashank Srivastava, CEO of the QFC Authority, has told the author that there will be more ventures like this, and that a key criterium will be a commitment to bring money to Qatar. “The Qatari funds are truly seeding funds,” he said. “They are there to seed either as fresh capital or accelerated capital. On the back of that, there has to be a commitment from the partner to raise other assets under management, and they need to be managed from here in Qatar. It is absolutely key and critical. We are going to measure our performance as a financial centre in terms of how many AUMs we have on the ground.”

Beyond the big four, there are many other interesting sovereign entities. Abu Dhabi in particular hosts numerous state-owned institutions. Perhaps the most interesting for foreign fund managers is Abu Dhabi Investment Council, or The Council as it is typically known, which is often described as a newer, nimbler version of ADIA (it has a special opportunities division, for example, enabling it to move quickly when it sees good reason to do so), but there is also International Petroleum Investment Company (IPIC, with a mandate to invest globally in energy and related industries), and Mubadala, another investment vehicle for Abu Dhabi aimed at diversifying away from hydrocarbons.

Further afield, the MENA region boasts several other sovereign institutions, but they tend to be in the most volatile parts of the world. The Libyan Investment Authority issued a number of mandates prior to the revolution – although fund managers complain that they weren’t always funded after being announced – and did have a clear investment strategy coming together, although it lost a lot of money on complex and ill-thought-out derivative-based investments in the mid-2000s. Since the revolution, it has appointed a new managing director, Mohsen Derregia, but Cerulli understands that his work today is chiefly involved in unfreezing the various assets of the fund, particularly those in Italy, where the pre-revolution fund committed assets into investments from banks to property to football clubs. It is likely to be later in the year before any new sense of governance structure or asset allocation direction will come together.

Next door, Algeria also has considerable oil and gas wealth, but is arguably even more threatening to foreigners than Libya is, following the attacks on oil and gas installations in the desert there recently. As of June 2012, Algeria’s foreign reserves stood at US$186.32 billion and it does have a sovereign fund of sorts, the Revenue Regulation Fund, also known as the Fund for Regulation of Receipts, with a mandate to insulate the Algerian economy from price volatility in oil and gas commodity prices; it is understood that today, it chiefly invests in treasuries and similar instruments.

One emerging trend that asset managers in the Gulf report is a growing interest in sovereign funds investing within the region. This never used to be the idea: the point of sovereign funds was to diversify assets away from hydrocarbon wealth, and it was generally accepted that in order to do so, the money had to leave the region completely. There have been exceptions – Kuwait’s, in particular, is closely involved in the local market, seeding most of the mutual fund companies when they got started, and often investing in the local stock market at times of need and/or good value (the two tend to coincide). But more recently, word is spreading of local mandates from local sovereigns. Sanabil, for example, in a rare example of activity, is believed to have allocated a large part of its funding into the Saudi market, much of it to be managed externally, and there are reports that KAUST has done the same – perhaps surprisingly since its CIO is ordinarily based in Washington DC.

Asset managers in the region have long hoped for a distinct second tier of institutions below the sovereign wealth funds, and in particular the emergence of a pension industry. To date, though, there is more discussion than activity; in Dubai, for example, a local pension fund has been discussed for some years, while Bahrain has appointed consultants to devise the structure of a pension fund and Abu Dhabi is believed to be setting up a fund to invest in the stock market using contributions from local workers. There are some pan-Arab organizations with institutional characteristics, and some of the top family offices behave very much like institutions; also there are some corporate pensions, but in some cases (like Saudi Aramco) they are offshore funds for expatriates. Many managers do report discussions, from Saudi to the UAE, with individual corporates about the development of new savings plans (National Bank of Abu Dhabi and Emirates Airlines are sometimes mentioned), but this remains a sector for the future.

Distribution

Mutual fund distribution is certainly not the heart of international asset management strategy in the Gulf, with mandates from sovereign funds representing such an enormous proportion of the total opportunity, but mutual funds do have the potential to become more important. Retail and high net worth wealth, whether expatriate or local, is growing in the region, and there exist several methods to distribute to them.

Cerulli finds international opinion to be divided on the best ways to reach these groups, as fig 12 demonstrates. Many – the largest group – insist that international banks are the best avenue for distribution, in particular through HSBC, Standard Chartered and Citibank for true on-the-ground reach, and through the Swiss banks and their peers for more high net worth individuals. There is a lot to recommend this: familiar institutions with similar standards to the international fund managers themselves; transparent accounting; open architecture with clearly articulated remuneration structure and shelf space arrangements; and also impressive reach (HSBC, for example, has been in Dubai since well before it looked remotely like Dubai).

Others say that to get real penetration to retail and mass affluent, one must go through the local bank route, and in our survey this represented about 40% of mutual fund distribution. All over the region, more and more local banks have built wealth management arms, and many of them sell foreign mutual funds, either directly in the name of the original fund manager, or on a white labeled basis.

This, too, brings advantages and disadvantages. These banks are embedded in local markets in a way that multinationals generally are not, and so can reach a wider client base, particularly in the markets outside the UAE. But the concept of open architecture is newer (“we’ve been told for five or six years the banks would embrace open or guided architecture and create a platform business, but we haven’t really seen it” says one manager), standards can differ from those of international fund managers, and in some cases remuneration models are murky.

A third, very new development is the appearance of IFAs in the region. This is chiefly a UAE phenomenon and is in its infancy, and for the moment caters chiefly to the western and NRI expatriate population (which is considerable: on any given day in the UAE, about 20% of the population are actually Emiratis).  But it is growing, both in scale and in quality. Three years ago cowboys were widespread in this sector, whereas now it is increasingly commonplace to find qualified and knowledgeable IFAs operating, many of them with experience from the UK. Most in the UAE only have a licence entitling them to sell insurance products, which has led to a growth in unit-linked insurance , which some investors are using as an alternative to a pension fund in the absence of anything  similar to invest in.

It is said that insurance products can pay as much as 7% in up-front commission. It is also said that the precise nature of commissions, trail fees and shelf space fees can be opaque in this emerging industry. One international describes local asset managers as buying their space on the menus of life companies, and paying rebates directly to IFAs. Still, many IFA industries have started like this before gradually maturing, first into more conventional trail commissions coming from products, and later fee for service.

In tandem with this has come a growing role for life insurance companies and for the bancassurance model. Both mutual funds and insurance have extremely low penetration rates in the Middle East and a great deal of potential, so it makes a certain amount of sense for the two to be sold together by individual advisors. Many internationals expect IFAs, life and bancassurance to be the fastest-growing part of the distribution environment in the next five years.

Fund managers tend to get frustrated by the nature of retail: many investors have unrealistic short-term expectations or tend to chop and change frequently. They don’t always have a shrewd understanding of risk either; one international asset manager in the region notes retail flooding to buy high-yielding individual local bonds paying 8%, without questioning how this yield can possibly be achieved.

High net worth clients are served more by the international private banks, many of whom scarcely even have a presence in the region but instead fly in and take the assets back to London or Geneva. One Middle East estimates that 65% of the private wealth of the Gulf flows through Switzerland: “Unless you recognize that fact, you’re going to fail to achieve any meaningful inroad into that pot of money.”

Family offices are more difficult to pin down, because they cover a spectrum from high net worth to institutional (many are incorporated) and are served by sales teams accordingly. There are family offices that employ asset consultants and devise their own quant strategies, with highly trained in-house portfolio managers. There are others that are, literally, a family, perhaps awaiting a moment of generational change, and who need wealth management advice as much as they need investment decisions. Successful managers are able to bring exactly the right mix of services to these groups, which are perhaps the hardest single segment to establish trust with.

International fund managers may find their funds sold in their own names – this is commonplace when selling through foreign banks, private banks, or for bigger established locals like Abu Dhabi Commercial Bank – or through white labeling, as for example is commonplace in Saudi Arabia.

In terms of product, it’s interesting that retail is pretty much the only area where Islamic investment has any traction. In Saudi Arabia, for example, the bulk of mutual funds are Islamically-compliant; at an individual level, it seems to be more important to invest in a way consistent with one’s faith than is the case among institutions.

As fig 11 shows, there is something of a middle ground in Islamic funds. Client demand for truly Shariah-compliant product is rare outside retail; very few institutions care about it at all. However, what is commonplace is a request for a screen which involves some elements of Shariah compliance, but not all. SAMA, for example, is believed to have given mandates in which a stipulation is made to avoid alcohol, gaming or pornography, for example, yet it would not exclude stocks with an exposure to interest, such as the banks.

One trend in recent years has been a growing irritation about the regulation around mutual funds in Kuwait. One manager calls the situation “diabolical: the Kuwait asset management industry has gone to an absolute standstill and there have been no new products for the last two years.” This is clearly bad for local managers, but not so much for international private banks, who in this environment find it easier than ever to fly in and take money overseas for less onerous investment.

In any event, the minutiae of mutual fund distribution barely matters to most multinationals, who don’t care particularly how much they sell to retail. The distribution model that works for most is: get access to the sovereigns, and do exactly what they ask, quickly. It works for a lot of them.

Investing in the Gulf

Very few international fund managers have bothered to set up investment capability on the ground in the Gulf. As discussed in the opening chapter, only ING, Templeton and Schroders have shown much appetite for local portfolio management; the many others who thought they would do so in 2007 have long since had a rethink, and in the meantime, the number of brokerages in markets like the UAE has halved.

The reasons are straightforward. Gulf stock markets are either illiquid, or difficult to access, or both, and in many cases lack the transparency, governance and regulation standards that international investors are comfortable with. No GCC market appears within the MSCI Emerging Markets index, so these remain frontier markets, off-index bets, despite having some of the highest per capita levels of individual wealth in the world.

For many years now, there has been widespread expectation that two markets – Qatar and the UAE – might graduate to the emerging market index. Each year, though, MSCI tends to keep them on review. There are very specific things that MSCI wants to see in order to elevate the two markets, so there is a clear roadmap if these countries do want to be part of the index. In Qatar’s case, when MSCI last declined it in June, it said the country’s one remaining impediment to reclassification was the very low foreign ownership limit levels imposed on Qatari companies. In the UAE’s case, the issue is around accessibility, specifically relating to custody, clearing and settlement matters. Today, international investors need to operate with a dual account structure, which MSCI finds prohibitive (this was previously the case with Qatar, but the island state amended its rules).

MSCI will look again at the two markets in its next review in June  – as it did in 2009, 2010, 2011 and 2012. And if the markets do get in?

The most tangible difference would be that passive asset managers tracking the MSCI Emerging Markets index would be obliged to invest in the two markets in order to get benchmark exposure. Then, active managers using the same index as a benchmark would also be more likely to invest without having to justify a holding as an off-benchmark risk-on venture. It is hard to quantify exactly what sort of dollar figure is involved but some approximate calculations for Qatar suggest it would take up 62 to 100 basis points of the index if included, equating to around $2.5 to $4 billion of incoming capital.

That is not, in itself, transformative, and many think that the real effect would be psychological, and would turn investor attention to the region for a closer look.

Others think that looking at tiny young stock markets in these nations is missing the point entirely, and that the real goal involves Saudi Arabia – by far the biggest stock market in the region, and representing roughly 65% of the entire GCC economy.

Access to Saudi today is inconceivable, as foreign investors cannot participate directly in the stock market; considered like that, openness seems a long way away. But those who watch Saudi closely from day to day can see a clear trend towards openness. This started some years ago when the region’s mutual funds were permitted to gain exposure to Saudi securities, albeit through a synthetic format. Now a plan roughly similar to China’s qualified foreign institutional investor (QFII) scheme is believed to be under consideration in order to allow greater foreign investment in the market. Others note the identities of new appointments: the new governor of SAMA has a private sector background, as do the new heads of the regulator and of NCB bank. “There a lot of change going on there, and that ultimately bodes well for the development of the kingdom as a place to do business,” says one fund manager. “Saudi really is the 600-pound gorilla in the room that has not woken up yet.”

If Saudi did find itself in international indices, that really would make all the difference. It could well leapfrog emerging markets entirely and end up straight in the developed world indices. The amount of money involved would require all international asset managers to take notice and this would probably be the moment when a critical mass of portfolio managers moved in to the Gulf – although by then, they might well miss out Dubai, Doha and Bahrain entirely and go straight in to Riyadh.

It’s worth recalling that if Egypt is added to the Middle East picture, then the situation looks different. Egypt is one of the world’s older stock markets, and is deeper and more liquid than anything in the Gulf – but of course has other problems, chiefly the country’s inability to reach anything that looks like an inflexion point in its economic fortunes post-revolution, as foreign exchange reserves have eroded and downgrade has followed downgrade. When Egypt does bottom out, there will be plenty of investors keen to participate in a turnaround story, but in the meantime capital is fleeing, and even the bigger companies too: Bill Gate’s investment in Orascom, the fertilizer group, recently was hailed as good news for Egypt, but disguised the fact that Orascom’s listing is moving from Cairo to Amsterdam, taking a lot of market liquidity with it.

As mentioned in the sovereign wealth fund chapter, one interesting new development is sovereign funds investing either in their own country or at least within the region. If this takes hold, and if a track record develops of these assets being outsourced to third party managers, this might provide another prompt for international managers to build local asset management capability, or at least to partner with local institutions who can provide it. Expertise in infrastructure, green technology and anything related to food or commodity security are likely to be useful calling cards when seeking these mandates.