What is your investment philosophy?
Everything begins with a first layer of global macro analysis and continues with a second layer of bottom-up fundamental research on single companies or assets we seek to have in our portfolio. Finally, we conduct a third layer of quantitative, algorithmic optimisation. Our target companies are high quality, solid, ever growing, best-in-class businesses that have managed to maintain a competitive advantage in their respective industries for years. Once we find them, we try to maximize our capital performance by buying when an irrational negative sentiment hit markets indiscriminately, and trading around positive and negative momentum.
Are the local regulatory conditions conducive for setting up an IAM?
The current regulatory conditions to set up IAMs in the Dubai International Financial Centre (DIFC) are straightforward and accessible by modern financing standards. We have also noticed an increased flow of both professionals and clients getting out of Europe and China and into the UAE – flows totally unrelated to Russian wealth.
What services do you value the most from an intermediary bank?
A distinction must be made in stage of evolution for IAMs. At inception, intermediary banks are necessary and sufficient to perform the job. The vital services are custody, brokerage, segregation, and core system, leaving the IAM time to focus on investments. At a non-startup level, things can be quite different. An IAM might still need these services centralised in its partner intermediary bank, but the price can be questioned.
In our experience and in the study of history of the past 10 years, banks have essentially lost all revenue streams from interest rates. Most of them managed to survive by either overcharging on commoditised services, or by launching a brokerage online platform. The question of how much you pay for these services becomes central for non-startup IAMs, such as us.
We chose to challenge the intermediary bank model by splitting it into three main parts. Today, we receive custodial services for cash and assets from two different custodians. We also place our market orders with several pure brokers. In addition, we have our own internal core system to aggregate all client data. This means we do not depend on any intermediary bank to digest and present data to us and our clients.
What are the challenges for IAMs in the region?
Setup and operating costs, competition, clients and the talent pool. We are talking about a substantial investment in cash and time to set up a well-developed infrastructure. Less thorough infrastructures risk a collapse due to personal relationships breaking down. Dubai and the DIFC are over-served markets, with lots of players already entrenched for decades now. Observation shows that clients tend to stay put from a jurisdictional point of view for several years. This means that capital rarely flows around major cities. In turn, the same clients are served by many providers, making competition high. With one of the most varied cultural melting pots in the world, the UAE offers wildly diverse ranges of professionalism. As with everything, looking for the highest professional and ethical standards is always a challenge, but the UAE might surprise on the upside.
