When GAM opened an office in Dubai in September 2007, it was not jumping on the bandwagon of the world’s fastest-growing financial centre but demonstrating its long-term commitment to a region that
When GAM opened an office in Dubai in September 2007, it was not jumping on the bandwagon of the world’s fastest-growing financial centre but demonstrating its long-term commitment to a region that is set to play an increasingly important role in the global economy and in different facets of the world’s investment industry in the coming years and decades.
The establishment of a presence on the ground is enabling GAM to develop local business in a large and fast-growing investment market consisting not only of local individuals and institutions, including sovereign wealth funds, but also large numbers of non-resident Indian investors and Western expatriates. The Dubai office also enables GAM to service large global financial institutions that it works with on a worldwide basis and that are also developing their activities in the Middle East.
GAM’s activities in the region are bolstered by sales and compliance functions in Dubai, as well as by the presence of its parent, Julius Baer, which in 2004 became the first international private bank to be licensed to operate in the Dubai International Financial Centre, and which also has an office in Abu Dhabi.
Just as important, however, is a commitment to developing the potential of the region as target for investors across the world – heralded by the relocation to Dubai of Sean Taylor, manager of a number of funds investing in frontier markets predominately in MENA (Middle East and North Africa) and emerging markets.
In June GAM became one of the first Western firms to receive an asset management licence from the Dubai Financial Services Authority, and it now manages more than USD670m (as of September 30, 2008) in frontier and emerging market investments from the DIFC.
Taylor is also playing an important role in the process of building long-term relationships with institutions in Dubai and across the region. While a great deal of local investment has traditionally flowed into property markets, the growing sophistication of investors in the region and their appreciation of the portfolio diversification benefits of hedge funds is likely to create a fruitful source of business in the future.
Amid the turbulence in markets worldwide over the past few months, the Middle East continues to offer huge potential for the future. Setting aside the gyrations in the price of oil, the economic boom in the Gulf has solid economic underpinnings based on long-term plans to develop modern infrastructure throughout the region, and in Dubai’s case, to establish itself as a global business centre.
The current impact of the global market turmoil notwithstanding, from a long-term perspective Middle East markets offer important diversification benefits because not only are they less correlated to developed markets and longer-established emerging markets, but inter-regional correlation continues to remain low or negative. Therefore an actively managed portfolio with investments diversified across the regions should enable investors to benefit from a low correlation of assets within the portfolio and smoother returns.
As the economic development of the Middle East continues, the region is likely to attract an increasing number of global investment opportunities. In this environment, the benefits of experience on the ground will be a key differentiator for investment managers.
By Matthew Lamb, head of Middle East wholesale and institutional clients, GAM
