|Covering the main asset classes|
In an exclusive conversation with Capital Business, Peter Duke, Head of Distribution - Middle East, Fidelity Worldwide Investment talks about a host of topics including Fidelity’s investment management solutions, the distribution of fund products in the UAE and the rise in emerging markets over the last few years.
Could you please tell us about your activities in the Middle East?
Fidelity Worldwide Investment has been managing assets on behalf of investors in the Middle East since 1976, and we have had an office in the United Arab Emirates since April 2000.
Fidelity’s offshore mutual fund range is available through selected retail banks, private banks and as part of the savings plans offered by life assurance companies across the region. On the investment side, Fidelity currently manages close to $10 billion in emerging market strategies, some of which is invested in the local markets.
How do you help people achieve their investment and savings goals?
We have an extensive suite of funds, which allow advisors to build robust and bespoke portfolios for their clients. Since Fidelity was founded more than 45 years ago, we have kept investing as our core activity. We are not a bank, we don’t do insurance - we are purely and simply investors. It is a particular focus, but one that gives clients the confidence to invest their long-term savings with us, in the expectation of consistent and superior investment returns.
What are the most common investment management solutions that you provide?
In the Middle East, there are many types of investors, each with a different attitude to risk and expectation of return. Our mutual fund range covers all the main asset classes, offering daily liquidity and transparent pricing within a highly regulated (UCITS) structure, governed by European law.
What are some of the challenges that you face? How do you work to overcome them?
We operate in a market where the awareness and knowledge of investors varies greatly. Often this means that investors have unrealistic expectations or short investment time horizons. It can also mean that people are unaware of the risks of a particular investment or the high costs associated with some of the investment options they are offered.
We work closely with our distribution partners to emphasize the basic principles of investing which have served us well over the past 45 years.
According to you, where are investors putting their money nowadays?
One common investment theme in the UAE has been the demand for income-generating assets, driven by low interest rates and an increase in inflation locally. This has forced investors further up the risk spectrum in the search of yield, meaning that high yield bonds, emerging market debt, dividend-paying companies and infrastructure assets have been popular.
There is obviously more volatility associated with buying individual securities, so many investors have opted for funds like our Global Multi Asset Income fund or Global Dividend fund to give them the yield they are looking for, whilst relying on us to manage the risk within a diversified portfolio.
The strength of developed markets over the past couple of years has also seen investors from the Middle East preferring markets like the US to many of the emerging market countries, which have underperformed in recent times.
Which market is the best to invest in for the next decade?
Our investment teams are meeting companies around the world on a daily basis, which provides some great insight into the themes that may emerge over the next decade. We do believe that leadership in the equity markets has passed back to the United States after a prolonged period at the start of this century when China, emerging markets and commodities were to the fore. Looking ahead, companies with an intellectual property edge in areas like technology, healthcare and financial services could lead stock-markets higher. For example, in the pharmaceuticals sector, we are on the verge of major therapeutic breakthroughs in areas such as oncology, whilst in IT, internet companies remain highly innovative.
Many of these companies are based in the US where good ideas can flourish as they have access to capital and a strong legal framework.
Outside of the US, I believe consumption will be an important theme in emerging markets. This should benefit China – if they can successfully re-engineer their economy away from a reliance on exports and infrastructure spending – and Africa, where the population is increasing and at the same time becoming wealthier.
Please tell us about the distribution of fund products in the UAE in line with the tight rules imposed by the government.
The Securities and Commodities Authority (SCA) introduced a new law regulating the promotion of funds in the UAE in August 2012. One of the main requirements of the new law is that banks must now register funds for sale with the regulator before offering them to their clients.
The law itself makes a lot of sense and I believe it is an important first step towards a more robust regulatory framework. However, whilst the process is very straight-forward, the costs associated with fund registration are quite high. Unfortunately, this has meant that some banks have either restricted the number of funds available to investors or promoted products which are currently exempt from this legislation.
I don’t think this situation will persist. I have found that the senior people at SCA are pragmatic, and open to the evolution of the new law, provided the interests of the consumer are still protected.
What, according to you, is attracting fund management organizations to this country?
The UAE is an exciting place to be and it is part of a region that has a very positive outlook over the next decade. The opportunity, in aggregate, is tremendous, but for many companies, it is not cost-effective to have a base in more than one country at this point in time. The UAE wins as its infrastructure and business-friendly environment makes it easier for companies like ours to explore opportunities in this country and beyond.
How have emerging markets evolved to attract investments in the last few years?
Emerging markets vary greatly – one common feature is that they are growing from a very low base. However, the reality is that the rise in emerging markets over the previous decade was unusual in its nature, as many emerging market economies simply rose on the back of the growth in China.
We expect this decade to be a lot more discriminate. Countries like the UAE and Qatar stand apart from many of their emerging market peers in that they have continued to develop infrastructure, improve regulation, target foreign investment and diversify their economies away from their traditional sources of wealth, namely oil and natural gas.
What opportunities do you foresee for asset managers looking at doing business in emerging markets?
The wealth of the Middle East, whilst fairly concentrated, is an obvious attraction for asset managers. However, the pace of development along with the ambitious plans of countries across the region also presents some exciting opportunities. From a business point of view, the longer people stay and work in the region, the greater the need to save for the long-term, which should benefit trusted, reliable firms with a presence on the ground.
From an investment perspective, deeper and broader capital markets will allow the inclusion of more regional companies in our mutual fund portfolios for investors outside of the Middle East.
What would be your advice for investors trying to do business in the region?
Businesses need to be close to their customers, so a local presence is essential. Companies must also recognize that it takes time to understand the local market and deliver relevant services and support. Just replicating what works in other parts of their business may not bring success locally.
About Peter Duke:
Peter Duke is Head of Fidelity's distribution business in the Middle East. Peter has 24 years of industry experience and has worked for Fidelity for over 10 years, the last 8 years of which he has been based in the UAE. Prior to joining Fidelity, he worked for AMP (an Australian life assurance company) and Aviva in the UK. Peter was educated at the British School in Oslo, the Vienna International School and Manchester University.
*Interview conducted by Jenny Kassis