Hedge funds seek out Middle East alpha
Investors say the Middle East is becoming an interesting new territory for hedge fund managers, as opportunities in the region increase.
Paul Watthey, marketing director for EMEA at Advent Software, estimates that there are approaching 60 hedge funds in Bahrain as well as a smaller number in Dubai. "There has not been the surge in the number of managers that was expected," he says. "We estimate about $3 billion in assets under management in hedge fund firms in Bahrain at present, but interest from investors is growing."
The appeal for domestic investors, says Watthey, is the diversification that hedge funds offer. "In the alternatives sector, Middle Eastern investors have had a strong bias towards private equity and real estate. And with the strong returns in domestic stock markets, there has been a sense of ‘why bother investing in hedge funds?’. As those returns have come off, that mentality is now changing and local investors are looking to diversify." Among those investors are sovereign wealth funds, and wealthy investors in Saudi Arabia, says Watthey.
Whether the funds being set up are truly hedge funds, however, is open to debate. "In many cases, MENA hedge funds are little more than long-only managers charging hedge fund fees," says Francis Akpata, head of investor relations at family office Acropolis Capital in London.