Interview: Emad Mansour
How is the local asset management sector growing, and what are the challenges facing its progress?
EMAD MANSOUR: The increase in per capita GDP and earnings has contributed greatly to the growth of asset management. However, over the past three years activity at the institutional and the high-net-worth individual retail levels have been weak, following the global economic crisis. People prefer to keep cash rather than invest in stocks or other asset classes, such as real estate or equity. The result is high levels of liquidity available in local banks, which themselves have become more risk averse. That money will eventually be deployed into higher yielding vehicles, which in turn will contribute to growth in local asset management services.
How can education and training efforts increase the maturity and sophistication of retail investors?
MANSOUR: We need to enhance the distribution channels available. Today, a retail investor in the region needs to educate him or herself and seek out products alone unlike in more mature retail markets where information is widely available. The more information retail investors have, the more educated and familiar with investing they become. Traditionally, the sole route to retail investors was through the banks, but this channel is not so effective, since banking personnel are not well versed in selling investment products. There is a vast opportunity for the relatively untapped market of retail investors, whereas institutional and high-net-worth investors seem to be covered fairly well.
Why is a second-tier market important, and how will it support the growth of the small and medium-sized enterprise (SME) segment?
MANSOUR: The creation of a second-tier market is an important and welcome initiative. There are many companies whose access to capital markets is limited, and they would need to grow to a certain size before considering the option of listing to raise capital. For a majority of companies, such growth is unrealistic. Their options for expansion will remain limited, thereby stunting natural growth. However, with a second-tier market these companies would have the option to list, a move which would also provide investors with an extra option. Such a market would also spur a growth of private equity groups, since they will be able to envisage and exit and therefore be more inclined to get involved with companies early on. This will positively affect the SME sector by sparking confidence in young entrepreneurs.
What is being done to diversify funding sources?
MANSOUR: Capital markets in developing countries are not for everyone. To diversify funding sources to other assets, buyers expect to see good governance and transparency, which many local companies do not provide, reducing demand for their equity. Thus, bank debt remains a main source of funding. It would be helpful if the status of Qatar’s capital markets were elevated from a frontier market to an emerging market, which would attract a greater volume of asset managers and inject more money into the cycle.
This is an important feature to advance any market, whether debt or equity, and no debt market in the GCC can reach that critical size. The way forward is to create one single regional debt market that will allow all GCC issuers to list, creating depth and credibility.
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