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Vulture fund with targeted returns of 40% and 90% capital preservation
Kuwait Financial Centre “Markaz”, one of the Middle East’s leading investment banking and asset management companies, announced the launch of “Markaz Opportunistic Protected Investment Program,” a vulture program which seeks to capitalize on the current state of distorted valuations. The Program will invest in a global portfolio of stocks and bonds and will be targeting 90% capital preservation.
At a press conference organized by Markaz, Mr. Gopal Menon, Executive Vice President of International Investments and Investment Advisory at Markaz, said “Acquiring attractive assets at low valuations is the golden rule of investments. Following the repercussions of the financial crisis, we believe valuations in some selected areas are reaching rock bottom and an extraordinary opportunity is arising to generate potential record returns. However, we understand the current weariness and risk-aversion of investors, especially after the recent sharp market declines, as a result, “Markaz Opportunistic Protected Investment Program” was structured in a unique way to target 90% capital preservation. The Program employs Constant Proportions Portfolio Insurance (CPPI) which is a dynamic strategy wherein capital preservation is attained by dramatically limiting the exposure to equity investments.”
Mr. Menon continued “An equally important objective, besides capital preservation, is to achieve attractive returns. We believe the time is ripe for bargain hunting and are aggressively seeking above-market returns for this product with a targeted performance of 40%. We think we can help relieve investors some of the pain felt after their investments and savings were met with deep losses in 2008.”
”Global capital markets are under severe stress. Panic and fear has gripped the psychology of investors, especially after they incurred huge losses in 2008. However, this panic has led to markets being taken to an oversold position. Companies with attractive business models and performance are also being shunned along with distressed companies. Strict due diligence and thorough evaluation can enable one to identify great opportunities in this troubled environment” opined Raghu Mandagolathur, Senior Vice President of Research. He stated that invariably markets bounce back after every crash and provide returns more than the loss incurred during the crash. For ex., during the Asian financial crisis, the Asian markets plunged by nearly 50% in 1997. However, during the subsequent two years the Asian markets went up by nearly 70%.
“We feel that this product is the right balance between capital protection and performance. This product is also attractive because of its liquidity and short term with a maturity of two years. If the 40% target is achieved sooner, the Program will be liquidated and the proceeds returned to the investor.”
Mr. Menon concluded “We understand how the investors feel and think we can help lessen the blow. The sheer scale of opportunities presenting themselves, across the board, is unprecedented and caused by the current state of distorted valuations in the markets. The situation will soon be reversed.”
The portfolio will be diversified in terms of asset classes as it includes equities, preferred stocks, ETFs, convertible bonds and cash and will be invested globally. Convertible bonds are bonds that can be converted into shares at a lower price compared to market price. In the recent months, prices of convertible bonds have seen tremendous selling pressure and are currently attractively priced. Preferred stocks carry priority over equity shares in dividend payments. Generally, the dividend payments are a negotiated fixed payment and therefore are stable income generators cutting down the risk of the overall portfolio. An exchange-traded fund (ETF) is an investment vehicle traded on stock exchanges. Most ETFs track an index and bring about the risk diversification element to the portfolio.
Subscription period is open until end of March 2009. The minimum investment amount is USD 25,000 with an initial lock-up period of six months. Monthly redemption is possible post lock-up.
-Ends-About Kuwait Financial Centre "Markaz" Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD 1.2 billion (USD 4.5 billion) as of September 30, 2008, 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 has been awarded a BBB+ corporate rating by Capital Intelligence Ltd.
Photo Caption:Mr. Gopal Menon, Executive Vice President of International Investments and Investment Advisory at Markaz
Mr. Raghu Mandagolathur, Senior Vice President of Research at Markaz
Mr. Fahad Al Abduljaleel, Vice President of Private Banking at Markaz
Mr. Bisher Al Bisher, Senior Investment Officer of International Investments and Investment Advisory at Markaz