At present the region accounts for just two percent of the firm's $14 billion (Dh51.3bn) assets under management, but Nigel Sillitoe, executive officer for the Middle East, believes that in a couple of years the Middle East will contribute around fifteen percent of Thames River Capital’s total assets.
He said: “By the end of 2008 we hope to have raised about $150m of new assets from the region.”
The company has a license from the Dubai Financial Services Authority (DFSA) to operate an office within the Dubai International Financial Centre (DIFC), and will be moving into the centre once space becomes available.
Sillitoe said: “We have decided to set up a physical presence in the region because it has become far more attractive with all the petro-dollars for asset management companies to look at raising capital. There are also a growing number of sovereign wealth funds, and pension funds in the region, plus stronger legislation for collective investment funds and greater acceptance for using external fund managers.”
London is currently the biggest financial market in the world, but Sillitoe believes the GCC will become a major financial centre.
He said: “If MSCI Barra includes some of the local stock markets in the MSCI Global Emerging Markets index – and there is a consulting paper going on at the moment - then the local capital markets could really take off.
“More and more US investment banks such as Goldman Sachs and Morgan Stanley are setting up offices here in Dubai, either with M&A teams or seasoned professionals who are dealing with sovereign wealth funds. If that is taken into account, together with the actions by the DIFC – who are looking to become the financial centre not just for the GCC but further afield in North Africa and India – then I think the DIFC will become a major financial centre for this part of the world.”
Silllitoe acknowledges that it is currently difficult for the GCC to compete with London and New York but this could well change.
He said: “In years to come Dubai could become a major hub, along with Qatar, and Bahrain. If we look at the investible assets within the GCC, reports have estimated that the amount is worth between two and three trillion dollars.
“If one assumes that the oil prices is going to remain high for many years – and the GCC countries typically budget for an oil price of $30 – then the wealth creation from this part of the world will be phenomenal. Hence more asset groups and investment banks will be setting up a physical presence in the region.”
Sillitoe points out that 14 of the world’s 20 largest financial institutions now have a license with the DFSA, and he expects the growth to continue.
“The growth has happened during a period of only four years and it will continue to grow. In addition there are a growing number of well-known asset management groups setting up in Dubai. Man Investments have been here for a while Schroders, Fidelity, Northern Trust and Bank of New York Mellon have all recently set up offices. There is a growing roll call.”
He believes that Dubai has taken the lead in establishing itself as a booming financial centre.
“They have been far more pro-active in marketing themselves. They have a better infrastructure and because their rules and regulations are based on the UK FSA, for an asset management company based in the UK looking to set up shop in the middle east the DFSA might be a natural port of call.”
According to Sillitoe, Thames River is not “jumping on the bandwagon of launching a GCC or MENA equity fund, which other western asset management groups are doing.”
Instead Thames River Capital, and the firm’s affiliated company Nevsky Capital, have a number of long/short and hedge fund of funds that Sillitoe believes are particular attractive to investors in the region.
These include the Warrior hedge fund of funds, the long/short property Longstone fund, Global Boutiques – a new fund run by the firm’s multi-manager team and the long-only Nevsky Capital Global Emerging Markets fund and the long/short Nevsky Fund.
According to Trustnetoffshore.com the Warrior fund has returned 82.78% over the past five years, compared to a sector return of 17.04% during the same period. Year to date the fund has a return of -1.26%, compared to a sector YTD return of -4.37%.
According to Trustnetoffshore.com, the Nevsky Fund has returned 311.77% over the past years, compared to a sector return of 109.80% during the same period. Year to date the fund has a return of -1.53% compared to a sector YTD return of -17.53%.
“The Warrior fund has already received quite a few investments and I would expect it to be our best seller over the next twelve months closely followed by some of the Nevsky offerings,” Sillitoe added.
Meet the house: Thames River Capital and the Middle East will follow later this month.