With the devaluation of the Egyptian pound, its depreciation against the US dollar, the implementation of the value-added tax (VAT), and the recently approved $12bn loan from the International Monetary Fund (IMF), individuals and companies have been searching for alternative asset management solutions. While a governmental economic reform programme is underway and subsidies are expected to gradually decrease, interest in non-traditional investment management solutions seems to have grown and gained traction.
As an investment management firm headquartered in the United Kingdom (UK), Rasmala runs subsidiaries in Egypt and the United Arab Emirates (UAE) and offers asset management solutions to its clients. Daily News Egypt talked with group chief executive of Rasmala Holdings Limited, Zak Hydari, about the firm’s investment strategy, its expansion plans, and the investment climate in Egypt.
How do you define your investment strategy in 2017 across your key markets?
Rasmala will continue to expand its portfolio of assets and develop new traditional and alternative investment management solutions for our clients. Following the successful launch of trade and leasing funds, we are now expanding our real estate business in the Middle East and other international markets, such as the UK, Germany, and the United States (US).
What’s your investment plan in regards to the 72 Dubai warehouses in Dubai Investment Park (DIP) that you have recently acquired? How can you achieve the 10% or more yields per annum?
All of the warehouses were acquired through a sale and leaseback agreement and will be leased for the next seven years. The properties are sub-let to a diverse group of 31 high-quality tenants operating in sectors such as food and beverages, retail, and manufacturing. An attractive location for the warehouses is another factor in our forecast.
Real estate is one of your key areas of investments. What’s the size of your existing real estate portfolio?
Our portfolio includes assets in multiple markets and is growing quickly. We have acquired three commercial properties in the UK in recent months, in addition to the 72 warehouses in Dubai. We have plans to invest up to AED 1bn in the UAE in the next 12 months and will also expand our business in other markets, such as Europe or the US.
Tell us more about your plan to invest $270m in real estate in the next 12 months. Will you focus on residential, commercial, or retail, and what are your target markets? And how are you going to finance these deals?
Rasmala will replicate the same model as in the DIP transaction which involves seeding/underwriting alongside strategic partners. We are currently reviewing a pipeline of deals with our partners, which include banks that would provide financing, to identify various properties. We aim to achieve a high level of income and medium- to long-term capital growth through investing in a diversified portfolio of commercial, retail, and residential properties.
Are there any financing transactions where Rasmala is acting as the lead arranger, be it sukuk or bond issuance? If so, what’s the size of these deals?
We have just announced the successful completion of the third and final series of Salam III Limited, a sukuk al-wakalah programme, sponsored by FWU Group, a Europe-based multinational insurance group. Rasmala was acting as the lead arranger for the issuance. The final series of the programme closed at $28.4m, whilst the first two tranches closed at $20m and $40m, respectively.
What is the total size of your equity and fixed income funds, and what’s the share of the Egyptian market?
As of 31 December 2015, Rasmala Group’s assets under management (AUM) stood at $1.1bn, 51% of which was in equity, 29% in fixed income, 15% in alternatives, and 5% in real estate. Rasmala is committed to its long-standing success story in Egypt. Our AUM in Egypt jumped from EGP 2bn at the end of 2011 to EGP 5bn in 2016, out of which EGP 3.9bn is in equities. This positions us as one of the largest equity asset managers in Egypt. We also have around EGP 1.1bn in money market and fixed income instruments. Rasmala has ambitious plans for Egypt and will aim to be the leading asset management firm in the country in terms of AUMs, as well as the diversity of our products to cater for different needs of our international, regional, and local clients.
Are there any investment funds Rasmala is planning to launch soon?
We are always working on developing new investment products and will announce our latest plans towards the end of the year.
Rasmala’s trade finance and leasing funds highlight the company’s innovative approach to asset management. Can you update us on these funds? Are there similar products Rasmala is planning to launch soon?
The successful launch of our leasing and trade finance funds demonstrates our ability to create innovative products. Both strategies are performing well and we plan to expand in these areas and will make further announcements later in the year.
How did the economic slowdown, driven by lower oil prices, impact Rasmala’s business?
Global market volatility continues to present challenges for many regional and international businesses. However, our focus on diversifying our business and developing alternative investment solutions has enabled us to weather the storm.
How does Rasmala evaluate the investment outlook in Egypt?
Overall, the Egyptian economy will need reform in order to stabilise the foreign exchange market and ignite growth in the private sector, while at the same time take steps to prevent deterioration in the purchasing-power of Egyptian consumers. We have been committed to the Egyptian market over many years and remain optimistic about the investment climate over the medium-term.
What’s your take on the recent financing negotiations with the IMF and the subsequent measures the Egyptian government is embarking on, such as currency devaluation and gradual subsidy reforms?
The IMF loan is significant and will facilitate investment flows. The loan is a vote of confidence and signals that the situation in Egypt is improving on the economic front, which will most likely increase investment flows. Currency devaluation and subsidy reforms were inevitable and will add inflationary pressures, especially when combined with already high inflation rates and the recently approved VAT. Going forward, implementation efforts will determine the impact on inflation and the economy as a whole.
What are the key sectors providing attractive investment opportunities in Egypt?
The financial sector stands to benefit the most during the remainder of 2016, contingent on the smooth implementation of the reform programme. In addition to companies with US dollar proceeds, the construction sector should also benefit from increased infrastructure spending that has been ongoing for the last two years and is likely to continue. We expect that investors will also favour real estate.