KAMCO Invest: Asset Management and Investment Banking in Kuwait and the GCC Region

Faisal Mansour Sarkhou shares his analysis of the capital markets sector in Kuwait and the GCC and discusses the impacts of the Covid-19 pandemic on KAMCO Invest and the sector. He also shares his perspective for the future of the financial sector in Kuwait and the GCC region and gives an overview of KAMCO Invest, the fifth largest asset manager in the region.

Interview with Faisal Mansour Sarkhou, CEO of KAMCO Invest

Faisal Mansour Sarkhou, CEO of KAMCO Invest

What is your analysis of the capital markets now that we have been through this crisis and we are in the recovery process?

Kuwait is undergoing a transformation which started a few years ago with a vision to make this country a major financial and trade hub in the region and internationally as well. A similar vision is what led to the establishment of the Capital Markets Authority approximately 10 years back, which served as a key driver in revamping and upgrading the entire market. Part of it was to revamp the system of trading and the other was to privatize the stock exchange. We were fortunate enough to play a role in that change, as we were part of the advisory consortium led by Tri-International Consulting Group, which also included Oliver Wyman. Throughout that period, we worked closely with the Capital Markets Authority to privatize the stock exchange from 100% ownership by the government to what is now approximately 6% and the remaining 94% owned by the private sector.

Other developments within the transformation included Kuwait’s inclusion in the MSCI Emerging Markets (EM) Index in November 2020. The inclusion discussion started early 2019. Since then, we witnessed a rally in the market, which was somewhat expected considering similar patterns identified in other emerging market countries that were going through the same process. Of course, the Capital Markets Authority and the regulators in the market itself were focusing on the inclusion in every aspect of becoming more of an emerging market. At the beginning, they identified 11 key points they needed to take care of, and they succeeded in achieving that. We are happy to have been part of the Boursa Kuwait privatization, which proved to be a very successful transaction.

What are the opportunities associated with Kuwait’s upgrade to emerging market by the MSCI?

The MSCI inclusion proved to be a success for all parties involved, including the new owners and management of Boursa Kuwait, the Capital Markets Authority, the clearing house, the brokers, and the investment companies. Our research anticipated around USD 3 billion in passive funds to be coming in by end of November with the MSCI inclusion, and the money that came in was around that amount. What was different in this inclusion in comparison to other, was that it occurred during the Covid-19 outbreak.

When looking at Kuwait specifically, that was despite the MSCI Emerging Markets Index inclusion, which would usually have a positive impact on the market leading up to the inclusion. If you look at the earnings during this period, there was a significant drop in the local and regional markets. You must keep in mind that the biggest component of a lot of regional stock markets is the financial services industry, and in particular, the banking sector. The banking sector has, of course, been impacted by the economic disruption and slowdown caused by the pandemic. Taking all this into consideration, you would have expected that after the inclusion, there would have been a drop in the market, a common trend witnessed by other markets following a similar exercise, but we did not experience that to the same extent as the other GCC markets.

How did KAMCO Invest and companies in Kuwait at large manage the Covid-19 pandemic?

Whether it is equities, fixed income, we really provide a very good basket of products in the asset management and investment banking space to our clients.

As for KAMCO Invest, the year started off exceptionally, at least for us, and several other companies within the sector. We had just concluded our merger exercise with Global Investment House, and we were ready to focus on building and strengthening our asset management, investment banking, and brokerage businesses across our core markets which include Saudi Arabia, UAE, and Kuwait. Shortly after, the outbreak occurred triggering massive closures impacting valuations within the capital markets. Of course, we were affected by the pandemic, as well as several other companies in the sector, leading to a tough ending to the first quarter, with gradual recovery in the second and third quarters.

On a larger scale, the rate of recovery witnessed in international markets around the world were to a better extent into positive grounds, except in what is traditionally called the EMEA area – Europe, Middle East, Africa – in terms of capital markets. When you look at the GCC, the recovery has been good, but we are still in negative territory in comparison to pre-Covid.

What is your perspective for 2021 and how do you see the future of the financial sector in Kuwait and the region?

When looking at how the pandemic impacted economies, markets, and businesses in 2020, I believe that this will set the stage for 2021, which will be a road to recovery considering the circumstances. The pandemic tested the business models of most organizations while identifying vulnerabilities in their operations. The restrictions and lockdowns imposed by governments across the world, led businesses to focus on online business continuity plans, remote working, and other digital methods of resuming operations. You can say that Covid expedited the need for digitization. Those who had implemented their plans benefited from it and the businesses that were not as advanced or lacked a digitization plan started to look at it more seriously.

In terms of the financial sector, there will be more transformations, major and minor, with digitization. We can see these transformations taking shape and becoming the norm across the world, whether it is a local, regional, or international investment bank, they are all exploring the digital routes and gradually shifting their roadmaps towards that direction. I mentioned that the pandemic accelerated the need for digitization. Within the financial sector, this need came in different forms. New investors required online access to enter markets, current investors wanted access to greater online services to manage their accounts, there were a lot of changes occurring that impacted the more traditional ways of doing businesses. Clients are now wanting to be able to complete their requests online and conveniently from the palm of their hand. If you look at Kuwait, at one point, that was the only way to do it since the country went into full lockdown. During that time, Boursa Kuwait was still open as well as regional and international markets, there were opportunities to take advantage of, and life had to resume despite the circumstances. These are the conditions that are driving the transformation in addition to changes in investor and client behaviors.

KAMCO Invest is present in many different sectors. How do you define yourself and how do you distinguish yourself from the competition? What are your strengths?

Our vision is to become the preferred non-bank financial services and products provider in the region, and that is what we focus on. We want to be the financial entity that you resort to for all your investment and savings needs. Our business model is primarily focused on managing our clients’ wealth and growing it sustainably. We are proud to have been ranked as the fifth largest asset manager in the region by Moody’s in their 2019 GCC asset management report. We manage around USD 13 Bn across various asset classes and jurisdictions. We primarily focus on the high-net-worth individuals and institutional clients. We cover a lot of their needs in the region. So, for us, whether it is equities, fixed income, we really provide a very good basket of products in the asset management and investment banking space to our clients. That is one of our core activities that distinguishes us: our variety of products.

Our services go beyond the borders of Kuwait or even the region for that matter. We have what we call our core markets: Kuwait, Saudi Arabia, and the UAE, and we are really focused on having these core markets provide the same level of service and solutions. We also carry out our services internationally by collaborating with institutions across the globe to deliver on our commitment to our clients. Our objective is to make our clients see that we truly are the regional leader that we want to grow more into. On the investment banking side, which is another strong pillar, we are one of the strongest and most active companies in Kuwait, as well as the countries we focus on. Our investment banking practice covers three main areas: equity capital markets, or ECM, the debt capital markets, or DCM, and the advisory side aspects, or M&A. We have a significant track record, and we try to help our clients whether they are in Saudi, UAE, Egypt, Turkey, Qatar, or whichever market we can help our clients buy, sell, or raise money. That is a service that we provide, and not many players are able to provide that.

For us, what distinguishes us is that we have a very transparent approach to our business. We aim at growing our clients’ money and basically being that preferred investment advisor and investment banker in the region. Our vision is not complicated, it is actually quite simple. We believe that the region has a lot of growth potential and that is what we aim to capitalize on. If you look at our trajectory from our establishment till now, we have been growing at double digit figures, despite all the difficulties that the region has faced, and even through the crisis caused by Covid. For us, that is a great success. Now, post-merger with Global, we have added the geographical strength we needed. We will continue to leverage our resources to grow our business, including our regional offices, to deliver an unparalleled experience to our diverse client base.


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