Funds Management, Middle East - Monday, February 1, 2010 21:42 - 0 Comments

Middle East loses its allure for foreign managers

Cerulli Global Edge, January 2010

Two years ago international fund managers were excited at the possibilities arising in the Middle East. Soaring oil prices were driving exceptional economic growth; stock markets had proven themselves uncorrelated to those in the rest of the world; the region’s vast sovereign wealth funds – including by far the biggest in the world, the Abu Dhabi Investment Authority – were showing an increasing willingness to give their portfolios out to external managers to run; and the biggest market of them all, Saudi Arabia, was starting to open up to the world.

In the time since, much has gone wrong. The Middle East’s stock markets did stay uncorrelated for the opening months of the financial crisis – but then fell just as far as everywhere else, only faster. “What world markets had experienced in six months, we experienced in six weeks,” says one local fund manager ruefully. The oil price plunged from US$140 a barrel to US$37 before recovering (to US$82 at the time of writing), and not all economies have followed the rest of the world in emerging from the global crisis. Dubai, in particular, is still in the thick of debt restructuring problems, while Saudi, the main prize in the region, has been mired in high-profile defaults. Continue…

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