Egyptian investment bank EFG-Hermes is planning to add a range of products to its asset management unit, as soon as it completes a joint venture with a Qatari bank.
Sukuk products, designed to comply with the stipulations of Islamic law, and Ucits funds are among the planned products, said Kashif Siddiqui and Karim Awad, who will become co-chief executives of the new entity.
The joint venture will see Qatari bank QInvest acquire a 60% stake in a new entity that includes EFG-Hermes’ asset management, investment banking, brokerage and research units as well as its flagship infrastructure fund. EFG’s holding company will control the remaining 40%.
The tie-up received regulatory approval earlier this month and will see the Qatari bank invest $250m.
Siddiqui is currently the head of EFG-Hermes’ asset management unit, while Awad leads its investment banking division. Speaking to Financial News at EFG’s second London investor conference last week, they said the deal with QInvest was likely to close by the end of the month.
Siddiqui said the joint venture aims to increase EFG’s fund management business’s assets under management by nearly 50%, from $3.4bn today to $5bn.
It is already prepared to offer a Ucits fund for European investors that could launch in the next three to six months, and is also studying the potential for the venture to launch Islamic financial products.
Ucits – undertakings for collective investment in transferable securities – funds can be marketed to retail and institutional investors across Europe.
Siddiqui said that there is still opportunity for additional investments from institutions, sovereign wealth funds and high-net-worth individuals in the Middle East and North Africa region, specifically in the large Saudi Arabian market and what he referred to as peripheral countries like Iraq and Libya.
The firm also plans to push south and east, in the hope of attracting investors from sub-Saharan Africa and Asia. The co-chief executives said Islamic countries such as Malaysia appear especially promising.
Siddiqui said: “The first step is to leverage the strengths of both platforms [EFG and QInvest] to deepen our roots in our home market, which is the Arabic-speaking world. Step two is to then to expand into adjacent markets or markets in which we feel we have some sort of core strength.”
The tie-up with QInvest is a boost to the firm’s ability to offer Islamic products, an area that has become increasingly popular among investors in recent years.
Siddiqui added: “The Islamic finance landscape is growing rapidly. There’s been a lot of issuance, particularly on the sukuk side, so there’s a lot of liquidity coming to the market. We see this as a phenomenal opportunity. Our partnership with QInvest gives us the Islamic capabilities to create a product that is relevant.”
The deal will create the largest investment bank in the Mena region and was negotiated with put and call options that allow QInvest to buy the remaining 40% stake in 12 to 18 months.
EFG’s flagship $1bn infrastructure fund was transferred to the joint venture as part of the deal, though the new firm’s leaders are still making final decisions about other private equity investments.