Alternative investment boom stokes demand for analytical tools

The alternative investment sector in the Middle East is growing and attracting increasing attention as a result of a number of factors. The wealth driven by rising oil prices is generating demand for new investment opportunities, while sovereign wealth funds established to provide long-term diversification of national assets are starting to put an increasing proportion of their capital to work in the alternative investment arena.

Meanwhile a number of jurisdictions in the region are encouraging the development of the alternatives industry through regulatory changes. The Dubai International Financial Centre in particular has created a legal infrastructure for lightly regulated investment funds. Service providers are now in place to support the business, and it's only a matter of time before fund managers establish a presence in order to meet investor demand for alternatives.

While a number of local fund providers are already looking at alternatives, initially the growth of the business is likely to be driven substantially by established providers trying to replicate their models from Europe, the US and Asia in the Middle East. As time goes on, the level of indigenous expertise is set to grow and local providers will have a greater impact in the marketplace.

These developments are of great importance to PerTrac Financial Solutions, which already enjoys a strong platform in the Middle East thanks to longstanding client relationships on the investor side of the marketplace, where the Pertrac Analytical Platform has been well adopted. Although the firm does not yet have a full-time, on-the-ground presence in the region, staff are focusing additional sales and training efforts on clients and contacts in the Middle East.

The firm is currently managing Middle Eastern clients and prospects through its London office. Many asset managers from the US and Europe are following a similar pattern of expansion, typically dedicating resources to and increasing time spent in the region before opening a local office.

An important issue is Shariah compliance, an area in which PerTrac functionality can play an important role. Investors can use the PerTrac Analytical Platform to screen for firms involved in sectors such as tobacco or financial services, and many of the available hedge fund databases list funds that have indicated they are Shariah-compliant.

In addition, since the universe of Shariah-compliant funds is smaller than for conventional products, since asset classes such as fixed income as well as funds that have significant investments in non-compliant sectors are unavailable, rigorous screening of those funds that are available to Shariah investors is essential to maintain diversification and performance.

Over the past year PerTrac has continued to expand its product offering, with a redesigned version of the PerTrac CMS workflow product for investment managers and the development of a new portfolio management system aimed at funds of funds and large investors. This is expected to appeal particularly to larger investors in the Middle East that are seeking products with which to manage their alternative investment portfolios.

Gerry Mintz is president and chief executive and Mark Weller is managing director for Europe, the Middle East, Africa and Asia at PerTrac Financial Solutions

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