Oman Shuns Hedge Funds as Sovereign Investor Targets Equities

October 24, 2013 Leave a comment

Oman Shuns Hedge Funds as Sovereign Investor Targets Equities

Oman, the largest oil producer in the Arabian Peninsula that’s not a member of OPEC, said it’s shunning hedge funds and alternative assets to invest directly in emerging market equities and real estate in stable countries. Oman Investment Fund, the sovereign wealth fund, manages almost all its assets internally and would only consider external managers because it could be “resource-intensive” to follow hundreds of stocks on a daily basis, Chief Executive Officer Hassan Al Nabhani said in an e-mailed response to questions, his first such interview in at least seven years.“The bulk of our portfolio comprises direct private equities investments,” Al Nabhani said. “Hedge funds are not transparent enough in their strategies and the risk they take do not compensate for the returns and the fees they charge.”

Sovereign funds in the six-nation Gulf Cooperation Council, such as the Abu Dhabi Investment Authority, are seeking greater control over their investments and curbing their reliance on outside fund managers. ADIA is building up in-house teams in areas such as real estate and private equity to make direct investments, according to its annual report published in May.

Oman, the second-smallest economy in the Persian Gulf, set up OIF in 2006 to preserve and grow the country’s wealth for future generations. OIF has assets valued at about $6 billion, according to the Sovereign Wealth Fund Institute.

Listed Equities

Al Nabhani said the fund holds a diversified portfolio of listed equities, mostly in emerging markets and Oman. The only alternative assets the fund invests in is a “handful” of private equity funds, he said, without disclosing any names.

The MSCI Emerging Market Index has dropped 1.3 percent this year, compared with the 20 percent gain in the gauge tracking stocks in developed countries. The Omani economy is forecast to expand at a compound annual rate of 4 percent from 2011 to 2016, according to the International Monetary Fund.

“With the uncertainties still surrounding the global economy, we have deemed that Oman in particular and our region overall offer extremely attractive investment opportunities,” he said, naming the tourism, logistics, marine resources, mining, advanced manufacturing and health care industries.

The fund in February bought a 41 percent stake valued as much as $57 million in Oman National Investment Corp. from Dubai Group LLC, one of several companies in the emirate seeking to restructure about $6 billion of loans.

To contact the reporters on this story: Klaus Wille in Singapore at kwille@bloomberg.net; Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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