Lazard has poached ING’s Middle East equity team based in Dubai.
The US bank’s asset management business has hired the former ING managers as it plans to restaff Lazard’s Dubai office after it was temporarily shuttered last year.
ING’s Dubai-based chief executive Farah Foustok and head of asset management Fadi Al Said are among those leaving.
The newly recruited investment team “will manage Mena and frontier markets’ equity strategies for local and global clients, leveraging Lazard asset management’s extensive emerging markets expertise and global research resources,” Lazard said in a statement.
ING’s Dubai office will remain as a sales office.
ING said the closure was “in line with the overall strategy of ING Investment Management to only continue full-fledged local for local asset management operations business in countries where ING also has a strong insurance presence”.
Rebounding equity markets and accelerating investment banking activity in the UAE is stoking demand for many investment professionals.
Lazard does not have a Middle East asset management business. The bank’s asset management division has a representative office in Bahrain, which opened in 2008.
Its Dubai office previously housed its Middle East advisory team that was focused on large sovereign wealth fund transactions. When Ali Asghar, the US investment bank’s top banker in Dubai, left last July to set up his own emerging markets-focused boutique company, Lazard’s operations in Dubai effectively ended as staff were redirected to the lender’s London office amid a dry-up of deals following the global financial crisis.
Calls to Lazard’s Dubai office yesterday were redirected to London.
“We have temporarily closed our offices as there is no current activity in Dubai,” said Mohammed Tahir, an employee at the Lazard office in Saudi Arabia. “We kept our office, but no staff is available there. There’s a lot of competition and business was not as per our expectations.””
A surge in prices and liquidity on the local bourses in Abu Dhabi and Dubai, boosted by a revival in investor appetite and the inclusion of the UAE into MSCI’s emerging markets index, may have encouraged Lazard to build up an equity presence in the region, fund managers said.
Dubai ended the year ranked as the second best performing index after Venezuela, with a 107.6 per cent return for its investors. Abu Dhabi’s gain was 63 per cent in 2013.
“It’s not a straightforward rosy picture,” said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi. “ING was one of the largest players in the industry and they decided to shut down. At the same time you have Lazard, which is a big player in asset management in the emerging markets space and they want to move fast and grab an entire team to save time. This headhunt was opportunistic for them.”
Following the establishment of Dubai’s financial free zone, western lenders flocked to the emirate to capitalise on a flurry of deals from taking companies public to advising on sovereign fund mandates. But the global financial crisis cut access to credit in the emirate, triggering a major sell-off across Dubai’s banking and property sectors.
From 2005 to 2011, the emirate’s index lost more than 80 per cent of its value. Traded value on the UAE markets also dropped to a trough of Dh57 bilion from Dh537bn in 2005.
Investment banks, whose key businesses include advisory, equity research and brokerage services, were forced to rethink their business presence, leading to retrenchments and the closure of their loss-making divisions.
A former senior banker at Lazard said the question remains whether big transactions on the advisory side, such as work on the billion- dollar Xstrata and Glencore merger, are better served out of London than from Dubai.
“But on asset management it makes sense. That’s where the growth had been and done well. This region is a source of capital where money can be taken from the region and put into equity globally,” the banker said.
halsayegh@thenational.ae
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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