For Jassim Alseddiqi, Abu Dhabi Financial Group (ADFG)’s chief executive officer, Egypt’s economy is on track to attract more foreign inflows with investor confidence reinforced by the current reform programme, which is underway in full swing.
“The economic reforms are starting to pay off. We are considering expansion in many sectors in Egypt including the financial sector through SHUAA Capital,” Alseddiqi told Daily News Egypt in an interview on the sideline of a press conference in Cairo earlier this month.
The firm, with around $6bn in assets, is currently studying many opportunities in the Egyptian market to cement its presence in the country, Alseddiqi added, giving no further details about the sectors his company is looking at. Below is a transcript of his interview, lightly edited for clarity.
What do you think about the investment environment in Egypt at the current stage?
I think the business environment is improving, with the government introducing all the facilities needed to lure foreign investors to pump cash into the Egyptian market. For our company, we think, this is the proper time to expand in the Egyptian market.
So you think Egypt’s economy is on track to revival?
That’s quite true, the economic reform is paying off after years of turmoil, with investors abandoning the Egyptian market. The main fear for investors was a shortage in foreign exchange and political instability, but now all of these fears are cleared, and investors are exploring the many investment opportunities that the government offers them.
So, your company is considering expansion in the Egyptian market?
Our strategy at the current stage is expanding in different markets, including the Egyptian market. Egypt is an important market for us and we see a potential to hunt opportunities in different sectors.
Could you specify which markets your company is considering expanding in at the current stage?
In the Middle East, we are considering expansion in Egypt, Saudi Arabia, and the UAE. We are also considering expansion in many countries around the globe.
Your company often looks at alternative measures in its investment strategy, particularly during slower times in the economy and on the financial markets. How does this strategy suit the company?
This has been the philosophy behind our investment strategy since inception; it is a fundamental part of who we are. Today, the alternative investment landscape is growing worldwide, and it is also the case in the Middle East. Therefore, it is natural that one finds new companies and initiatives in the alternative investment space. We like to invest in downtrend cycles, because value becomes more apparent when things are on the down side and investor sentiment isn’t present, or is weak. In terms of sectors, real estate and financial services are the largest in the UAE, outside of oil and gas. We, as a group, have a lot of experience and expertise in these sectors; therefore, we will always be looking at them and we will always be active there. Having said that, we also want to expand into different sectors, such as maritime and oil and gas services, among others. It depends where opportunities present themselves. Technology is another sector that is gaining traction in the UAE in terms of biotech, ICT, and mobile applications, for example.
Back to the Egyptian market, what about the sectors your company is concentrating on to hunt for new opportunities?
At the current stage, we are focusing on non-banking financial opportunities. We are also considering opportunities in different sectors, and we will announce them in time.
What financial instruments and methods suit these kinds of alternative investment strategies?
It is diverse. Alternative investments are typically very bespoke and customised; therefore, they are done in ways that are different and new compared to the standard practices regarding investments. When it comes to debt, for example, we talk about junior debt, mezzanine debt, hybrid debt, and convertible debt—everything that’s non-conventional. In terms of equity, it’s about preferred equity, normal equity, private equity, and private investment in public equities (PIPE).
How does your company go about managing and assessing risk in its investment strategy?
We invest in down cycles when investor sentiment is weak and people are wary of investing. People think we are taking excessive risk in these periods; however, it is in fact the opposite. We are taking minimal risk. First of all, you are getting a lot of value up front and, secondly, you are already in a downward cycle; therefore, the value has already dropped to a certain level. Our investments are typically opportunistic and represent excellent value. In the projects that we rescue, we take a lot of collateral; therefore, it is very much asset-backed. These projects need us not because they are not successful projects, but because banks have caps and don’t want to deploy financing over a certain period of time, for example. It is not necessarily because the project isn’t viable, which allows us to source capital and funding that is new in the region. Historically, it was equity and debt. Today, it is equity and off-plan investing, last-mile funding, mezzanine, and conventional debt. The funding structure evolves over time.
Abu Dhabi Financial Group wants to be another market maker for the ADX and DFM. How will that enhance the company?
If you want to be a market maker in the local capital markets like the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM), you have to have a license from the Securities and Commodities Authority (SCA). We are in discussion with the SCA to launch our market-making division, which will market-make on the ADX and DFM. Today, only the National Bank of Abu Dhabi is a market maker. Capital markets will have a major role in the economy with time, and the SCA has done a good job in coming up with new legislation and regulations, new instruments and tools to help get new companies in through initial public offerings (IPOs), and so forth. Time is important, and things will eventually mature and evolve in the market over time. It is already heading in the right direction. Whether things stay low for a while or go back up, there will continue to be forward progress. We are doing this because we see an opportunity to make money. The industry is still nascent, not matured, and growing. There is a lot of room to grow and make money here, especially if you know and understand the market well. Market making is a profitable business and, simultaneously, it is a cornerstone for a healthy and thriving financial market. It will be challenging in the beginning, but the regulator is working closely with us on this matter.
What about the outlook for SHUAA in the Egyptian market?
SHUAA Securities Egypt is targeting to be one of the biggest traders on the Egyptian Exchange (EGX) by the end of this year. We have been working on re-launching our business in Egypt over the past six years. The company’s ranking is 18th among brokerages operating in the Egyptian market. SHUAA will be one of the five largest firms in the Egyptian market by the end of 2018 in terms of active securities transactions, on which SHUAA Capital will be the Middle East’s first investment bank. We are currently working on obtaining licenses to provide financial consulting services, promotions, IPOs coverage, and assets management this year. We believe in Egypt’s abilities in promising investment opportunities and a strong financial system, in line with implementing the economic reform plan.
The firm has the vision to become one of the world’s leading financial groups. What are your benchmarks to achieve this and how do you see the way forward?
One thing we set out to do from the start was ensure that we didn’t achieve anything by compromising on our performance. Our performance so far has been stellar, and we want to keep that going. That is our most precious asset at the moment. Growth in numbers isn’t really a key metric. For us, consistent, stellar performance is what we’re looking for.
ADFG is a leading global investment group that provides, through its subsidiaries and organically, a wide range of investment opportunities and financial services to a substantial and diversified investor base including corporations, financial institutions, sovereign wealth funds, and family offices to its clients.
Pursuing a strategy of opportunistic investments across a variety of sectors and geographies has enabled ADFG to successfully adapt to macroeconomic variations and respond to investors’ changing needs. While the group’s investment strategy is sector-agnostic, its investments are currently focused on private and public markets, debt, real estate, and technology. ADFG’s expertise inspires an active and nimble approach, which enables the group to deliver fast, flexible and convenient solutions.
ADFG was established in 2011 and has since evolved to become a major player in the region, delivering attractive returns to its clients. Today, ADFG has assets under management in excess of $5bn and offices in the UAE (Abu Dhabi and Dubai), the UK (London) and Eastern Europe (Podgorica). The group has received widespread acclaim for its strong track record and pioneering approach to investing.
Jassim Alseddiqi, in addition to being CEO of Abu Dhabi Financial Group, is the chairperson of Reem Finance, Integrated Capital, and Integrated Securities. He is also a board member at Tourism and Development Investment Company, Qannas Investments, Abu Dhabi Capital Group, and Gulf Navigation Holding. Preceding his tenure in the investment world, he was a noted lecturer at the Abu Dhabi-based Petroleum Institute. He has a bachelor’s degree in electrical engineering from the University of Wisconsin-Madison and a master’s in the same area from Cornell University.