Rashid S Al-Saadi, CEO, National Investment Funds Company gives an insight into the company’s investment philosophy, returns and the upcoming Shariah Compliant equity fund.
Can you give us a brief background of NIFCO and its operations?
National Investment Funds Company SAOC or NIFCO, as it is known, was established through a Royal Decree in 1998. It was set up as an asset management company, with a primary focus to invest in Oman. NIFCO is promoted by the State General Reserve Fund, all government pension funds and Public Authority for Social Insurance. It manages mutual funds, private equity investments and strategic long-term investments.
It started out with its first flagship fund, National Equity Fund (NEF). The fund was initiated in January 1999 as a closed ended equity fund with an initial tenure of 10 years, which was later extended unanimously for another ten years in 2009. NEF invests in listed securities on the Muscat Securities Market. The fund size is in excess of RO70mn.
In January 2006, we launched our second fund, the NIFCO GCC Diversified Fund. This fund invests primarily in listed securities on the stock exchanges of the GCC. The fund is in excess of $25mn. The Private Equity Investment Group does strategic investments in various sectors in Oman. Some investments done by this division have been Octal Holding, Opal Marketing, Sun Packaging, Oman Hospitality Company and Al Meera Markets.
NIFCO is in the process of launching a new Shariah Compliant GCC Fund. This will be the first fund from NIFCO which will be offered to the public and the fund will be an open ended fund. All Omani and non-Omani investors will be able to invest in this fund. The IPO of the fund will be launched in June.
Could you briefly highlight the performance of your investments?
In all modesty, I would like to say with satisfaction that our investments have performed quite well. Our flagship fund NEF, for example, has given an annualised return of 9.66 per cent per annum since inception till the end of April 2013 against MSM 30 General Index’s return of 6.48 per cent. An initial investment of RO100 made at the time of inception would have grown to around RO393, including all the payouts, at the end of April 2013. These returns have been better than the benchmark returns of MSM 30 General Index. The dividends paid out till date is in excess of 211 per cent
The NIFCO GCC Diversified Fund has also performed well. The annualised returns as at the end of April 2013 for the last three years have been 8.6 per cent per annum as against the benchmark return of 6.0 per cent for the same period.
What has been your investment philosophy and style?
We adopt a very conservative but prudent and active investment approach. We do a mix of both top-down and bottom-up style of investment. Our in-house research team regularly evaluates the economies, markets and companies and identifies opportunities to invest or divest for appropriate returns. The risk profile of the investment is also matched with the risk profile of the fund/portfolio to check if the investment profile suits the portfolio. All investments are reviewed and approved by the Investment Committee as a matter of practice and also to carry out overall risk assessment. We adopt the fundamental style of investing with a long term approach in mind. Although investments are made with a long term focus, we continuously monitor all investments for any deviation from fundamentals and book profits or exit at appropriate times.
Are your funds open for investments for the common investor?
Currently, we have two mutual funds, National Equity Fund and NIFCO GCC Diversified Fund and one Private Equity Fund. All these funds are closed ended fund with initial investors being the State General Reserve Fund, all government pension funds, Public Authority of Social Insurance and commercial banks of the Sultanate. However, we will soon be launching a Shariah Compliant equity fund which will be an open-ended fund. This fund will be open for all investors, Omani and non-Omani up to the stipulated regulatory limits.
Can you share some details about this new fund?
Al Kawthar Fund has been conceptualised as a Shariah Compliant open-ended equity fund. This fund will invest in securities listed on all the GCC stock markets. It will invest in all Shariah compliant products approved by the Shariah Committee and within the permitted regulatory requirements. The units of this fund will be offered for subscription through an Initial Public Offering at a price of RO1.020, including the two per cent issue expense fees, to all investors. After the IPO, investors can apply any time for investing at a price determined on the basis of the weekly NAV. I would like to emphasise here that investors should do their own independent due diligence before investing. Our past performance should not be taken as guidance for future performance. The IPO of the fund should be launched in June.
This is the first Shariah Compliant Fund that NIFCO is launching. What is the idea behind floating such a fund?
The GCC markets have done quite well and offer very good scope for investments. We are making an attempt to extend our services to non-institutional investors who have not been able to participate in NIFCO managed funds earlier which have performed extremely well over the last decade. NIFCO intends to share its expertise and experience, with other investors, and provide opportunities to invest. Shariah compliant finance, including banking and investments, is a new phenomenon for the Sultanate. While still at a nascent stage, this new space offers exciting opportunities for investors. Prior to this, investors looking for Shariah compliant investment opportunities, had to look outside the country. Our attempt is to offer these services to our investors here in Oman. While the legal and regulatory framework for Shariah compliant investing differs from conventional investing, the overall investment paradigm remains the same. We will be applying our proven and tested investment approach and philosophy but within the Shariah framework and try to replicate our success of other funds.
Since it is starting from scratch, Oman offers significant scope in terms of development of Sharia Asset Management Industry
Shariah AUMs account for a larger share of the pie.
How will the proceeds of the fund be deployed and what are the expected returns that you are looking at?
The fund’s objective is to achieve capital appreciation primarily through investments in equities listed on the regulated stock markets of the member countries of the GCC as per the Shariah principles. We will focus on companies that enjoy strong fundamental factors and promise long-term growth after conducting a comprehensive analysis.
Under normal market conditions, at least 80 per cent of the fund’s investments will be made in listed securities including listed equities, SPVs, and Shariah compliant tradable income generating instruments, including Sukuks, of issuers in member jurisdictions of the GCC states. The fund may also invest up to 20 per cent of its assets in unlisted equities of companies in these jurisdictions. Furthermore, the fund may invest up to 20 per cent of its assets in SPVs or investment funds, which provide access to investments that would not otherwise be directly available to the fund.
The fund would have a diversified asset allocation strategy and a more dynamic approach to asset allocation would be considered for managing risk across various asset classes and periodically adjusting allocations to adjust for dynamic market conditions.
Like in any other equity investments, we cannot guarantee any specific returns in the future. However, our objective will be to perform better than the benchmark and protection of capital. We also would like to emphasise that investment in equities entail inherent risks and there is no guarantee of returns or return on investment. We recommend that investors refer to the prospectus of the fund for more details before making any investment decision.