Sedco Capital Prepares Feeder Fund Before Tadawul Opening

Jeddah-based Islamic investment firm Sedco Capital plans to launch a Luxembourg feeder fund for its Gulf money market fund and is exploring ways to offer a Saudi-specific product to international investors, its lead fund manager said.

Sedco Capital, which manages and advises $3.8 billion of assets, is strengthening its in-house asset management capabilities before the planned opening of the Saudi stock market to direct foreign investment in the first half of 2015.

Last week the firm launched a Saudi-domiciled money market fund which invests in sharia-compliant structured products and trade finance transactions, said Yazan Abdeen.

“For that fund we are creating as we speak an international feeder fund that will be able to give access to that underlying fund to international investors,” Abdeen said on the sidelines of an industry conference in Bahrain.

Gulf markets are increasingly on the radar screen of global fund managers after Qatar and the United Arab Emirates were added to MSCI’s emerging market index last May, and because of the Saudi market opening plan.

The sheer size of the Saudi market, the Arab world’s biggest with a capitalisation of about $550 billion, means it could represent around five percent of emerging market allocations globally, larger than Russia’s share, Abdeen said.

This would make it mandatory for emerging market investors to put money in the kingdom and encourage them to seek a range of options to access the market.

“We think there will be an area of business development to ensure accessibility to international investors into the Saudi market…From that angle you have a pure Saudi product that needs to be created.”

By contrast, Saudi investors are seeking to diversify their investments from a domestic focus to a regional one, he added.

“We are winning mandates from financial institutions to actually diversify their investments from being Saudi-centric to being MENA (Middle East and North Africa)-centric.”

Sedco Capital, a fully owned subsidiary of Sedco Holding, launched a Gulf equities fund in September, its 14th fund overall and the first to be managed by its in-house team.

The move is part of Sedco’s strategy to source two-thirds of its assets under management from outside Saudi Arabia in four to five years.

In 2013, it launched an Islamic fixed income fund with an initial $100 million and an Islamic global equity fund with $150 million, both using Credit Suisse as investment manager.