equity fund to invest long/short in turkey and arab world reaching for 20% annual returns
London's Mena Capital is planning an equity fund investing long/short in the Arab world and Turkey. This is the first hedge fund for a region, that up to now has barely appeared on the radar screens of the hedge fund community.
Khaled Abdel Majeed, founder of Mena Capital, says the fund will target 15%-20% net annual returns over a cycle after its launch, which is slated for September or October.
The fund, prime brokered by Citigroup, is being domiciled, and possibly also listed, in Bahrain, thereby improving the chances of it being granted access to the Saudi and UAE markets, still largely closed to foreign direct investment.
Islamic law forbids shorting, so Abdel Majeed will organise some of the fund's short positions directly with stock lenders. Over time, he expects countries such as Egypt and Morocco to allow shorting. Corporations' foreign-listed shares can be shorted.
Before establishing Mena, Abdel Majeed worked for Blakeney Management running institutional money, as well as at EFG Hermes and Arab Bank. Also joining Mena Capital is David Edgerly and Russell Hendry, each with extensive management experience.
Investors should not see the region as uniform, Abdel Majeed said. There are oil exporters such as Saudi Arabia, Kuwait and UAE and oil importers such as Jordan, Morocco and Lebanon. "Then you have countries that march to their own tune, such as Egypt and Turkey, which are plays on internal reform," he added.
Even where markets may be driven by similar factors - such as Saudi Arabia and Kuwait, there is a correlation of around 0.2, providing diversified factor exposures within the portfolio. The markets as a whole are not highly correlated to Brent Crude's price, to gold, the S&P 500 or the MSCI EM Free Index.
Abdel Majeed noted the Gulf region's demographics and un-employment are driving reform and economic liberalisation to attract investment and create private sector jobs. Global accounting standards are applied to listed firms there, he added.
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