Middle East Hedge Funds To Prosper, Conference Told

by Carla Johnson, Investors Offshore.com

16 March 2006

Antoine Massad, chief executive officer of Man Investments Middle East, told the 7th Hedge Fund World Middle East 2006 conference last week that regional interest in hedge funds was growing strongly.

"At this point, the alternative industry has made the transition from a niche investment area to become a mainstay of the asset management industry," he said. Massad said that his group was playing a major role in the industry's development in the region. "Not only are we celebrating our 20th anniversary in the Middle East, but we have also just opened our fully-owned subsidiary, Man Investments Middle East Ltd., at the Dubai International Financial Center (DIFC). Events like these help us to reach out to investors and explain the current and future shape of the industry," he said.

Massad said that investments by private clients from the region in hedge funds had slowed in 2005, although institutional demand had remained stable. He said that acceptance of the hedge fund industry had grown in the past 10 years and regional institutions were increasingly investing in hedge funds.

"The next five years will bring greater regulation, consolidation, standardization of IT and reporting, and increasing regionalization of products. Hedge fund providers will have to adapt to this new environment and only those who have the capacity to invest in research and product development and in exploring new markets and opportunities will survive this transformation," added Mr Massad.

"The shift in investor demand and the emergence of new strategies that require in-depth research and industry participation is creating broad economies of scale in the global hedge fund industry. In the coming years, this will drive consolidation, creating larger, international investment houses that provide a higher level of service, transparency and investor choice. Further developments and enhancements within regional financial centers could only result in a range of new hedge fund products trading in Arab markets," he explained.

"The past year has been an important one for the hedge fund industry in the Middle East, particularly with the emergence of a new international financial center in the region. The DIFC appears to be a crucial step toward the creation of locally-focused funds, while the continued institutionalization of the industry has brought it into the mainstream of asset management," Massad said.

Man Group Chief Executive Officer Stanley Fink told the conference that the growth rate of hedge funds had varied between 20-25% over the past five years, but would level out at about 15% for the next 5 years.

DIFC Chief Executive David Knott said that DIFC was in the final stages of establishing a regulatory framework for collective investment funds (CIF). He urged all participants to consider opportunities for funds management within the DIFC under a regulatory regime that will be highly credible but also commercially balanced. He said that domestic funds must be readily accepted for international passport purposes, which means that their management must adhere to the core principles laid down by the International Organization of Securities Commission (IOSCO).

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