Hasan Al Jabri JEDDAH — New market challenges need new approach, Hasan Al Jabri, CEO of SEDCO Capital, one of Saudi Arabia's foremost asset management companies, said at the 3rd Standard & Poor's Leaders' Forum hosted by the UAE Ministry of Economy at the InterContinental Hotel Abu Dhabi last Thursday under the theme “Middle East Horizons, Toward Developing Economies and Sustainable Investment". He said “we at SEDCO Capital have been moving toward a more Adaptive Investment Approach whereby we pursue a more dynamic, flexible and where possible more thematic approach. With this approach, we strive for a balance between shorter-term, dynamic investment decision-taking as well as longer-term investment opportunities through a combination of top-down and bottom-up selection decisions." “We are also seeking greater diversification through portfolio construction and manage diversification across asset classes, geographies, risk factor exposures (risk premia) and investment themes," he added. Contributing more than 27 years of banking experience in the region, Jabri took part in an interactive panel discussion titled “Aligning Investment strategies: Matching Financial Products with Promising Market Segments, Revisiting Business Models and the Quest for Sustainable Yields and Investment Performance". One example of SEDCO Capital seeking to innovate is through the development and implementation of what has become the biggest Islamic funds platform in Luxembourg, where SEDCO Capital over the past couple of years, has pooled its assets and launched a sophisticated Shariah-Compliant Special Investment Funds platform in Luxembourg. This represents one of the first times that a Middle Eastern entity has established a Special Investment Fund (SIF) and one which is domiciled onshore in a major financial jurisdiction. It is also a platform that is both cognizant and compliant with existing and future financial and funds regulation. Pointing out the advantages of the SIF, Jabri said: “The platform provides SEDCO with access to independent and world-class funds management, operating and administration capabilities whilst at the same time, enabling us to pool our holdings with third party clients. This enables SEDCO to generate significant scale economies that can then be shared with or passed on to its clients and investment partners." Moreover, Jabri gave an overview on investment environment in the years since the great recession of 2007-2009, noting that “we have now reached a defining moment in economic and financial history where many long-held ideas and assumptions are being challenged." “One such area is that after 20 years of a credit fueled boom, we find ourselves in a period where persistent deficits are the norm and have been for over four decades. Never before have so many countries had such long periods without surpluses," he said. “Clearly, since the global financial crisis first surfaced during 2007, the developed world has experienced no growth and no deleveraging. As a result, our view is that we find ourselves in an environment where macro factors dominate markets. In such an environment, developed economies face many years of shorter, more volatile and uncertain business cycles where this increased cyclical uncertainty leads to a constant re-pricing of macro factors." Discussing the “shorter business cycle theory", Jabri said “already we see some evidence of this with successive periods of ‘risk on' and ‘risk off' trading activity and stop/start growth or reflation that is intimately bound to the effects of policy stimulus, such as Quantitative Easing. This phenomenon can also be characterized as the shorter business cycle theory. For example, most countries have not yet exceeded their 2007/2008 peak in real economic activity despite the positive effects of policy stimulus." Commenting on how the changed environment affects investors, Jabri said: “This sort of economic world is unprecedented and therefore difficult for markets to price. Thus, it poses some challenges to all investors and an investment approach that relies on a buy-and-hold strategy becomes less optimal in a more volatile world." – SG
