MANAMA: Sico, a leading regional asset manager, broker and investment bank, yesterday announced that the Sico Kingdom Equity Fund continues to outperform its benchmark index by a healthy margin ending the year as the top performing Saudi fund in the region with an annual return of 23 per cent versus an index return of 8.3pc
“We take a tremendous amount of pride in the fact that our experienced team of asset managers have been able to consistently deliver these remarkable results with our flagship Kingdom Equity Fund, which has doubled in value over the past seven years since inception in an environment where market returns have barely hovered above 20pc,” said Sico chief executive Najla Al Shirawi.
“As Saudi Arabia continues to capture passive fund flows ahead of the kingdom’s inclusion in the MSCI in June and the FTSE emerging market index in March, we look forward to creating even more value for our investors in the year to come.”
Sico head of equities asset management Shakeel Sarwar said: “2018 was a story of two halves. At the beginning of the year, we invested aggressively in large caps where fundamentals supported our investment rationale. This segment saw increased interest ahead of the inclusion of Saudi Arabia in the emerging markets indices. Many of our core holdings, particularly in the banking and petrochemicals sectors, posted healthy returns.”
“We did not totally dismiss the small to mid-cap segment of the market, but identified the winners. Within the consumer sector we played on the consolidation theme and invested in companies that were growing their market share in an environment where the market as a whole was either shrinking or flat,” he added.
Despite market volatility in the fourth quarter, the Sico team did not alter their strategy but stayed disciplined to their core investment thesis, which helped preserve the fund’s strong returns. The team’s ability to identify companies and sectors that are resilient to market forces has been key to the Kingdom Equity Fund’s consistently strong results. Over the last three years, the fund is up 33pc despite an economic slowdown in Saudi Arabia. In the last five years, it has appreciated by 37pc versus an 8pc decline in the overall market.
Going forward, the team will keep a sharp eye on how the market reacts to a series of passive inflows expected during the course of 2019. The flow commenced in March 2019 and extend for a nine-month period during which an anticipated $15 billion is expected to enter the market due to the emerging market index inclusion.
“In 2019 we expect the overall index to remain range-bound given the market trades at 17x earnings and volatility can be expected around the period when passive flows enter the market. However, we are confident that we will be able to generate a decent return for our investors,” said Mr Sarwar.
Commenting on the prospects of the petrochemicals sector in 2019, the asset management team remains cautious given the expectation that earnings peaked in 2018 and most companies will be reporting declines in profits. Some companies, however, are expected to increase their dividend payouts which should provide some upside potential.
Regarding the consumer sector, the asset management team expects the organised retailers to continue benefiting from consolidation and lower than previously indicated employee related expenses.
The Sico Kingdom Equity Fund focuses on securities listed in Saudi Arabia, allowing investors to benefit from the kingdom’s growing equity market. The primary objective of the fund is to seek long-term capital appreciation. The fund distributes annual dividend. Since its inception the Sico Kingdom Equity Fund has been one of the top performing funds in the region. It utilises a bottom-up investment approach backed by a research-intensive investment process.
&uuid=(email))