Joint ventures in the Gulf states

In the past few years, the Middle East has become a fierce battlefield for the international banking and fund management community. On the front line is Russell, the international multi-manager investment house, which has established a number of strategic partnerships with dominant players in the region. Shamindra Perera, managing director of Middle Eastern operations at Russell, says the lack of incumbents in the Gulf asset management industry makes it easier for people to embrace the multi-management concept. The high proportion of foreigners in countries such as the UAE also makes investors more inclined to holding global portfolios. Russell’s first strategic partnership goes back to 2003 with National Bank of Dubai, which recently merged with Emirates to create the largest bank in the GCC countries, Emirates NBD. Russell has also established alliances with the Ahli Banking group in Bahrain, Kuwait and Qatar and in Lebanon with Audi Saudi private bank. Latest in the series is a partnership with Sharia compliance investment house Jadwa Investment in Saudi Arabia, officially signed in May last year. For Russell, this has opened the doors to distribution in the largest retail market in the Arab region. It also signals Russell’s entrance into the Sharia compliant investment space with the creation of the World Equity Fund - run by Martin Lei, Legg Mason and Aaron Street - and the Emerging Markets Equity Fund - run by Scottish Widows, Legg Mason and Principle Global Investors. The funds have raised $260m since launch in January 2008. Stocks are screened and approved by a Sharia Board, which falls within Jadwa’s strengths, The selection of managers remains with Russell. Product distribution is channelled through Jadwa’s branches in the country. There is only a small number of firms in the world who offer Sharia compliant products, explains Mr Perera. But rather than relying on this restricted universe, compromising the quality of the investment solution, Russell has offered to its selected managers the pool of 5,000-6,000 stocks which are screened and pre-approved by the Sharia board. In fact, none of the managers used in the two multi-management Sharia funds had ever managed Sharia money before, but that becomes irrelevant. Russell and Jadwa, through their jointly formed Dublin based umbrella fund company, aim to cater for the needs of the world’s Muslim population, in addition to local, Saudi investors. New sub-funds can be added to the umbrella, with Jadwa funds also listed in Saudi Arabia.