Getting asset management right as one would for mum

The global asset management business has recently been attracting the attention of regulators and policymakers.

As the industry has grown, with independent managers competing with the operations of many of the biggest banks in the world, some watchdogs are concerned that it could prove to be the next Achilles heel of the financial industry.

David Marshall, who runs what is probably the biggest asset management operation in the UAE for Emirates NBD, is confident his business meets the regulators’ requirements, but believes there is one extra special person he must satisfy: his mother.

“I’ve put my mother’s money into some of our funds, so I have to get it right. She’s coming out for the holidays to have a quick look at her portfolio,” he says, only half-jokingly.

Other clients of Emirates NBD will probably take some assurance from the fact that Mr Marshall has some personal “skin in the game”, but in any case there appears to be little to raise regulatory fears at the business.

United States and European regulators have recently been debating whether asset management businesses should be classed as “systemically important financial institutions” that should be taken into account in their “stress tests” of banking risk.

Mr Marshall explains that although his business is probably the biggest in the UAE, whose assets of some US$2.1 billion are rivalled only by National Bank of Abu Dhabi, that is still only a small part of Emirates NBD’s overall assets, around $90bn.

But there are other checks and balances too. State Street, the big US finance house, is a custodian and administration partner for the Emirates NBD operation, and therefore subject to increasingly strict US standards.

“And in the UAE, the Dubai Financial Services Authority is very strict. They tick all the right boxes and make sure we’re on our game,” he says.

Mr Marshall says there has been an increasing trend in the business for wealthy clients based in Europe who seek to find a new home for their funds as European Union regulatory pressure grows. “A lot of those, for example from Liechtenstein or Switzerland, are looking at the UAE. But we have to decide if we want that kind of client.”

The ability to be choosy with potential clients is enviable, but really reflects the position Emirates NBD has among the UAE banking leaders. Mr Marshall has been in the Emirates since 2005, so he has seen the full cycle of boom, bust and recovery.

He is in no doubt that the recovery in the UAE’s economic fortunes will make it an attractive place for investors over the medium term.

“Asset managers don’t make short-term forecasts, nor do we do the real long term. So I can’t tell you what will happen after 2020, but up to then I am very bullish,” he says.

“I believe the debt crisis of 2009 was overstated, and we’ve actually recovered pretty quickly. Dubai recently got away 10-year and 30-year bonds on the same day, which is a measure of investor appetite.

“The economic fundamentals of the UAE and the region are strong, with strong oil prices and government surpluses.”

Regional equity markets have had a very good 2013, especially Dubai, and Mr Marshall believes that will continue into next year, although perhaps not at such a fast overall rate. The local banking sector will continue to be attractive, he believes.

“Winning Expo really has been very significant. We increased our positions in the financial sector in the run-up to Expo, but I believe there is more to come next year as asset values continue to improve and loan impairments decline,” he says.

The “suite” of products Mr Marshall’s business offers covers a wide spectrum, from global sukuks through blue-chip companies to Middle East and North Africa opportunities funds. Clients can chose from a graduated menu, ranging from “conservative” to “aggressive”. Islamic business accounts for half the investment total, and that has been rising, Mr Marshall says.

He prides himself on his stock selection, especially in Saudi Arabia, but feels unable to share his top picks for 2014. After all, the clients pay for that expertise, he points out.

But a quick run through the published fact sheets gives some flavour of Emirates NBD’s investment thinking. Saudi Basic Industries Corporation, the conglomerate, figures high in several corporate portfolios, while Etisalat and Emaar Properties are also favoured.

The DP World sukuk is top of that category, but he also likes the recent issue from Gems Education, the schools operator. “Gems is high-income, and has performed well since the issue,” he says.

In quite a crowded marketplace for asset and wealth managers, Mr Marshall does not view the private banking sector as a competitor, mainly because they do business directly with the client while Emirates NBD works through a network of professional advisers and insurance companies. “We’re the only regional asset manager that has links across the global insurance industry, and that kind of coverage is unique,” he says.

Mr Marshall recently clinched a deal with Jupiter Asset Management to advise Emirates NBD on its global portfolio, which he says is the “final piece of the jigsaw”.

His mum should be pleased to hear that.

fkane@thenational.ae