Markaz: Increased Need for Diversification of Investments

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Markaz: Increased Need for Diversification of Investments 14 - Oct - 2006

Markaz announced that global stock market investors continue to experience higher levels of volatility fuelled by growth and inflation uncertainty. The conditions that have supported the most recent bull market run: low interest rates and low inflation, abundant liquidity, strong cross border capital flows and strong growth have now been called in to question. Clearly the low interest rate environment has reversed with all major central banks entering their tightening cycle. This was led by the US but has since been followed by Australia, the European Central Bank, Japan and China. Significantly the rise in interest rates has worried equity investors that growth may be compromised and that inflation may prove more difficult to control than previously assumed. Global Markets witnessed a meltdown during the month of May for example the broad-based Dow and the S&P 500 fell by 1.7% and 3.1% in May. The NASDAQ witnessed a much higher fall of 6.2% during the month. European markets, in general, registered higher losses in May compared to US. FTSE 100, CAC and DAX all fell by around 5% during the month. The Nikkei too succumbed to heavy selling pressure witnessed in equities globally – the index fell 8.5%. May turned out to be another bad month for the GCC markets. The markets were extremely volatile, witnessing large intra-day swings. Investors globally are now much more sensitive to risk factors and the increase in equity market volatility internationally is expected to continue. Portfolios that have up until the end of the first quarter been focused on particular themes (growth, commodities, momentum, etc) are now diversifying to accommodate the higher volatility levels. As a result investors will place a premium on what appear to be uncorrelated sources of potential out performance. Markaz has provided investors a unique way in diversifying in the Atlas diversified portfolio, which is managed by the International investment Department. The portfolio is fully diversified from Asset-wise diversification to country-wise diversification. Atlas Diversified portfolio provides an investment portfolio with the full merits of asset allocation techniques. It captures market opportunities in various sectors, asset classes and markets through one investment, one-for-all investments. Atlas seeks to obtain diversification with low volatility and consistency in returns. It provides swift actions avoiding substantial risk, as opposed to investors managing their own asset allocation it also offers flexibility, liquidity and solidity to investments. Atlas managed to achieve 65.79% cumulative ITD (Inception to Date) from March 2003 compared to the MGSI (Markaz global Securities Index) which achieved 46.99% Atlas outperformed the index by a considerable amount with a standard deviation of 7.68% which is a low volatility level considering Annualized Returns of 16.83% Atlas has superior performance compared to the benchmark which has Annualized Returns of 12.58%. Kuwait Financial Centre 'Markaz', with total assets under management of over $4.35 billion as of June 30, 2006, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd. -Ends- Photo Caption: Manaf Alhajeri, General Manager of Kuwait Financial Centre “Markaz”