QFCA 01 cover: 00-cover.fc41 17/6/11 13:58 Page 1 Qatar guide to asset management in association with funds global
REGULATION, OPERATIONS, PLANNING & STRATEGY ad_template:Layout 1 12/6/09 15:27 Page 1
WEALTH YESTERDAY TODAY TOMORROW From priceless art to the diversity of an investment portfolio, Asset Management is thriving in Qatar. With its world class regulation and secure and transparent rule of law, the QFC is leading Qatar into a dynamic and diversified future. Benefit today from the lowest tax in the world,* 100% ownership, repatriation of all profits, and an onshore trading environment. And tomorrow, why not experience one of Qatar’s oldest treasures3 www.qfc.com.qa BUSINESS ENERGY QFCA 03 Contents:Layout 1 17/6/11 15:31 Page 3
contents
06 Qatar in 2011 A look back at the state of Qatar’s economy 08 QFC Authority Q&A Yousuf Al-Jaida outlines his outlook 10 Asset management focus Helping the industry meet global standards 14 Executive interview Emad Mansour of QFIB discusses his plans 18 Executive interview Axa IM Qatar and its first mover advantage 22 Application process How firms get listed by the QFC Authority 24 Regulation Exploring new guidelines on risk and stability
Published by 27 Taxation funds europe limited ©2011 288 Bishopsgate What new tax rules mean for global players London EC2M 4QP Tel: +44 (0)203 178 5872 Fax: +44 (0)203 178 4002 28 Insurance Building an online marketplace for insurance Printed in Great Britain by Buxton Press
The views expressed in this publication do not necessarily coincide with the views of the publishers. 30 Qatar Exchange Although the publishers have made every effort to ensure the accuracy of the information contained in The challenge of increasing liquidity this publication, neither Funds Europe Limited nor any contributing author can accept any legal responsibility whatsoever for any consequences that may arise from errors or omissions contained in the 34 Listings publication or from acting on any advice given. In particular, this publication is not a substitute for Licensed firms in Qatar professional advice on a specific transaction. QFCA 05 Intro - jss aspnf:Layout 1 17/6/11 14:04 Page 4 QFCA 05 Intro - jss aspnf:Layout 1 17/6/11 14:04 Page 5
INTRODUCTION
A new hub for asset management
Shashank Srivastava, acting chief executive, QFC Authority
I am delighted to be introducing Funds Global ’s increasing breadth and depth of investible new Guide to Asset Management in Qatar assets and robust regulatory regime coupled which serves to highlight the country’s growing with its strategic location, increasingly make it role in the region’s dynamic asset management one of the most attractive fund management industry. The guide brings together a wealth of markets in the region, offering emerging market information on Qatar in terms of economic returns at risk levels associated with developed fundamentals, future investment and the factors economies. driving growth in the asset management I am sure that for asset management firms industry today, as well as offering insightful looking to establish themselves in Qatar, Funds interviews with leading executives from various Global ’s Guide to Asset Management in Qatar organisations, such as the Qatar Exchange, will be an indispensible resource. State Street, AXA and QInvest. This new guide examines how Qatar can offer asset management firms looking to locate to the region distinct advantages over other financial centres and, indeed, looks at the role of the ‘The guide brings QFC Authority in developing Qatar as a pre- eminent hub for asset management. Together together a wealth of with an overview of Qatar’s world-class information on Qatar regulatory regime, the guide also offers a step- by-step approach to setting up an asset in terms of economic management business in the emirate. fundamentals, future There were US$85.8bn (€59.4bn) of assets under management in the Gulf Co-operation investment and the Council region last year (National Bank of Abu factors driving growth Dhabi’s GCC Mutual Fund Index) and while Qatar represents a small proportion of the in the asset management GCC funds industry, this is rapidly changing. industry today’ Qatar’s exceptional economic growth, built on its rich long-term hydrocarbon resources, high levels of institutional and retail wealth, the
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QATAR IN 2011
Onwards and upwards
Funds Global examines the economic, social and cultural developments within Qatar and how they are helping to promote the country’s asset management market
The strong economic foundation of Qatar is undeniable. In 2010 Qatar was identified as the world’s fastest growing economy, expanding at a rate of 19.4%, and also had one of the highest GDP per capita at just under $80,000. Much of this growth is due to the strength of its hydrocarbon industry. Qatar has the world’s largest per capita production and proven reserves of both oil and natural gas. The high levels of production and export of liquefied natural gas, oil, petrochemicals and other related industries are a huge contribution to the Qatari economy and also a significant target of international investment. More than $100 billion has been invested in the Qatar’s energy sector from abroad while Qatar plans to invest more than $120 billion in its energy sector over the next ten years. Yet the energy sector is not the sole focus of Qatar’s economic development plans. Figures produced by the International Monetary Funds (IMF) show strong growth in a number of non- hydrocarbon-based sectors, such as transport and communications, trade and tourism, and the finance, insurance and real estate industries. Of course the finance industry in Qatar suffered some negative implications from the financial crisis just like any other region did, however it has staged a rapid recovery, posting double figure percentage growth in both 2009 and 2010, something that was noted in a recent IMF Country Report.
Speedy recovery “Qatar has weathered the global financial crisis exceptionally well, reflecting the swift and 06-07 Qatar in 2010:Layout 1 17/6/11 15:46 Page 7
strong policy response by the authorities,” sophisticated infrastructure at the Qatar stated the report. “The sizeable enhancement Exchange and the work being done at the of liquefied natural gas capacity; large ‘The finance industry Qatar Financial Centre Authority to promote government support to the banking system and in Qatar suffered the asset management sector to an international increase in public spending helped sustain high audience will result in an MSCI upgrade growth rates through the global crisis.” some negative sooner rather than later. While noting that the country’s banking implications from the system “remains sound”, the IMF report Sporting ambitions recommends that Qatar’s economic policy financial crisis just Another likely source of investment and should focus on “strengthening the efficiency of like any other region’ economic growth for Qatar will be the Fifa the domestic financial system and regulatory World Cup in 2022, something also noted by arrangements”. It notes that “the Qatar the IMF in its country review. A substantial sum Central Bank (QCB) will have to rely of resources had been earmarked for the major increasingly on macroprudential instruments to infrastructure upgrades that would be needed manage the credit cycle and to counter should the World cup come to Qatar, such as potential surges in capital inflows”. the integrated metro/rail systems, roads and The report recommends the work being done airport. Ever since the vote was made in at a regulatory level, noting that the QCB is December 2010, this infrastructure investment closely monitoring potential risks to the banking has begun to flow in. system. “The QCB published its first Financial With just over ten years to go before the Fifa Stability Review and intends making this an jamboree comes to Qatar, there is plenty of ongoing process. The authorities’ commitment time for the infrastructure upgrades and various to establish a single financial regulatory authority construction to be completed – as one asset under the umbrella of the central bank remains manager in Qatar suggested, there is five years undiminished. They continue to align their to complete the projects and five years to show supervisory and regulatory frameworks with best them off. standards and practices, and plan to implement Football is not the only international sport Basel III proposals early.” with a growing profile in Qatar. In addition to The surge in capital inflow that the IMF refers hosting the 2006 Asian Games, Qatar has more to may well come from a change in status from recently staged the IAAF World Indoor the influential index compiler MSCI index, Athletics Championships (March 2010). The which could have a very positive impact on the two Qatar Tennis Opens for men and women country’s asset management industry. The are regular stops on the professional tennis tour change would see Qatar upgraded from a circuit and the Qatar Masters golf tournament ‘frontier’ market to an ‘emerging’ market thus has featured on the PGA European Tour making it an eligible destination for investment schedule since 1998. for many institutional investors whose Qatar has also made a significant investment investment decisions are governed by strict in expanding its cultural facilities. The exposure criteria. New foreign investment could government-sponsored Qatar Foundation is consequently increase by anywhere between chaired by HH Sheikh Mozah Bint Nasser Al $2-4 billion. Missned and was established to promote MSCI is due to make its latest announcement cultural richness and preserve the country’s in June and the upgrade is not a certainty. One heritage Aside from the historical landmarks of the outstanding issues relates to foreign that feature in the area, such as the ancient ownership levels of Qatar equities. An MSCI village of Al-Zubarah, the nineteenth century review of Qatar identified the current limit of mosques of Simaisma, and the residence of 25% as on that needs to be raised (by Sheikh Abdullah bin Thani Al-Thani, there are comparison the UAE has a limit of 49%). a growing number of museums and art However the Qatar Exchange has stated that galleries. The Museum of Islamic Art exhibits the 25% level will remain at least until the end masterpieces spanning three continents and of the year. thirteen centuries. And there is also the Qatar What is more certain though is that the strong National Museum and the Arab Modern Art economic growth of the country, the high Museum and the Waqif Art Centre which aims standard of regulation within the financial to preserve and promote both Qatari and services industry, the technologically Middle Eastern artistic traditions. fg
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EXECUTIVE INTERVIEW Planning for the future
Funds Global talks to the QFC Authority’s head of asset management, Yousuf Al-Jaida, about the development of the industry and the plans for the future
Yousuf Al-Jaida was appointed as director, management firms are Qatari-run and Qatari- strategic development responsible for asset ‘As a financial centre we based and the drive to develop the sector was management and banking in August 2010. The crystallised with Al-Jaida’s appointment. appointment followed the Qatar Financial have a holistic role to Here he talks about what has been achieved in Centre Authority’s decision to pursue a “three play in creating an the past year, the growth of the asset hub strategy” that focused on asset management sector, the underlying economic management alongside the captive insurance environment for growth foundations in Qatar and challenges that remain. and reinsurance sectors. in financial services’ Prior to his QFC Authority appointment, Al- FG: You have been in the job since August Jaida was head of indirect investment at the 2010. What have you done in this time? Qatar General Retirement and Pension Authority which included overseeing the At the outset it was important that we consulted management of hedge fund, private with our key stakeholders within the State of equity, real estate, fixed Qatar as well as the asset management industry income and equity to ensure that our strategy was aligned to the portfolio investments. state’s fundamental objectives and, of course, The QFC Authority the industry’s own requirements. It was also very had devoted resources to important to review the regulatory regime and asset management prior investment rules and guidelines. to August 2010 but it To assist in this process we conducted several felt that it was industry round table events as well as important to appoint participation in various working groups to a Qatari national analyse the current and future development of to oversee the Qatar’s financial services sector. We also held development of one-to-one meetings with key financial services the sector. A lot institutions. And a new collective investment of the asset rulebook was released at the start of 2001.
FG: What are the objectives for Qatar’s investment management industry and what is your role in achieving these objectives?
The QFC Authority is Qatar’s financial services sector development arm, providing a uniquely sustainable platform for regional growth in asset management. Our objective is to build what we hope to be the pre-eminent hub for asset management in the region. As a financial centre we have a holistic role to play in creating an environment for growth in financial services, such as advice on legal and regulatory refinement, encouraging the development of domestic and international business within Qatar as well as actively developing local talent through ventures such as the Qatar Finance and Business Academy. We are always looking to engage with the
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industry and have regular meetings with both within the GCC and consulting with various groups and individuals and to take on feedback. ‘At the QFC we are bodies to encourage more investment activity I think the recent regulatory changes are and create more depth and breadth of liquidity. indicative of that consultative approach. mandated to build There are some challenges involved but the an industry, not just move towards an upgrade in MSCI status from FG: The QFC Authority has a three-hub ‘frontier’ to ‘emerging’ will be very important. approach (asset management; reinsurance; produce numbers. and captive insurance). How does this work FG: Describe the economic outlook for in terms of developing the asset management We are looking to build Qatar’s investment management industry? industry in Qatar? Are there some obvious sustainable growth that synergies you have been able to draw on? will last for decades’ The outlook is extremely bright, especially when you consider that Qatar as an economy is There are clear synergies. One way is through underpinned by an estimated $20trn of proven facilitating a vibrant reinsurance and captive hydrocarbon resources to be monetised over the industry. Regionally-based companies will next 100 years. inevitably keep more capital within the region – We are an economy growing at an exceptional Qatar’s infrastructure development spending rate in comparison to other regions globally. As plans of $140bn (€98.9bn) to 2015 is a good mentioned, we are increasing our infrastructure example of the opportunity for increasing development in order to sustain our growth as a captive and reinsurance business. As that nation and also support future events such as the proportion of capital increases, the amount of Fifa 2022 World Cup. The amount of current assets to be managed increases. It is worth and future capital that requires professional noting that regionally, McKinsey & Company management in Qatar will therefore continue to [management consulting firm] estimated that grow. On top of that, the availability of asset asset management revenues in the GCC [Gulf classes within the region needed to deploy this Co-operation Council] region would increase by capital is also developing at a healthy rate. 10 to 15% annually from 2005 to 2015. FG: In the long term, what kind of mix of FG: Has there been much activity in terms of asset managers (local and international, new asset managers setting up in Qatar or in long-only and alternative) would the QFC new funds being promoted in the region? Are Authority ideally like to see in the region? there particular areas of growth? As before, we welcome companies of all types. Yes, we have attracted and granted licences to Like any good portfolio, it is important to reach Matrix, Concordia and JP Morgan to the QFC – an ideal balance. In our case, we certainly all representing different strategies and company anticipate that the industry can support a strong structures, from blue chips to niche firms to real presence of both Qatari-headquartered and estate. The amount of assets under management global firms – in fact, it will thrive on it. In terms is increasing all the time but it is not just about of asset class, currently it is long-only and real numbers, it is about the type of operations. At the estate. However, as economies continue to QFC we are mandated to build an industry, not develop and regional exchanges become more just produce numbers. We are looking to build sophisticated, more products will appear to meet sustainable growth that will last for decades. those financing needs. We have also seen major developments at the We are also focused on engaging with the Qatar Exchange, whose equities trading universities to ensure that the various financial platform was recently upgraded to more services courses available are an opportunity for modern, world-class standards through the help local graduates in addition to the engineering of its strategic partner NYSE Euronext. Qatar’s sector which is very dominant in Qatar. We strategic vision is for the stock market to act as a hope that participation in these university global exchange, working in accordance with courses will encourage more sophistication and the best international practices and standards. activity in the sector from investors as well as The exchange now has an important piece of managers and other service providers. infrastructure to comfortably work towards Qatar is in a unique position as it can offer expanding the capabilities of the market with emerging market level returns at developed new products, such as bonds and other market risk levels. The growth has been great diversified exchange-traded instruments. and we are also very proud of the robustness of We spend a lot of time looking at asset classes the market. fg
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ASSET MANAGEMENT FOCUS Overcoming the challenges
Funds Global talks to local asset management firms and investment banks about the market in Qatar and how it can be developed to meet international best standards
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The asset management market is at a nascent in Qatar, the real intention is to encourage stage of development in Qatar, just as it is in ‘There is surplus capital them to establish their manufacturing arms and other areas within the Mena region. However, Mena headquarters in Qatar. Most of the the tendency to view the Mena market as a in the region so yields established names in asset management will homogenous whole should be resisted, are down because there already have set up a head office in the region especially in the case of Qatar where the and it is unlikely many would want to uproot an underlying economics are markedly different is too much money existing office. from many of its neighbours. chasing too few To date, the QFC Authority’s development Dubai, for example, suffered a damaging strategy has been based on encouraging organic exodus of investors following the restructuring opportunities’ growth rather than enticing firms through of state-sponsored property scheme Dubai financial inducements. A considerable sum World in November 2009. There has been a has been invested in establishing a solid recovery since, most noticeably in the successful infrastructure that meets international standards. bond issuance from Emirates, the Dubai-based And asset management has been singled out as airline, which attracted more than $6bn one of three areas of particular focus. Now it has (€4.2bn) in orders. been built, Qatar must wait to see who will come. Yet there remains nervousness among investors. Furthermore, recently announced Economic dynamics proposals from the state regulator the Securities Shahzad Shahbaz, chief executive officer of and Commodities Authority (SCA) has caused QInevst, one of the largest investment banks in some uncertainty at both a domestic and Qatar, believes the QFC Authority is right to international level. Local asset managers fear focus its development efforts on the asset that an extra layer of regulation and the lack of management and insurance sectors rather than distinction between retail and institutional trying to position Qatar as a financial centre investors will make the launch of new funds too that is all things to all people. Furthermore, a expensive and play into the hands of larger service like asset management is particularly local banks. suited to the economic dynamics of Qatar Additionally, international asset management where there is a surplus of capital. firms are worried that the SCA’s proposals have Public equity remains the most popular been poorly put together without proper investment vehicle in the region and QInevst consultation and could be just the beginning of offers over 100 funds as part of its Mena offering a series of regulatory measures designed to along with discretionary portfolio management. favour local banks over international Following the financial crisis, high-net-worth institutions. Consequently, any international individuals in the region are more willing to give firm considering the launch of a new Mena- their capital to an investment manager rather based project may be looking at domiciles other than managing themselves. than Dubai. It is still a tough environment to raise capital Meanwhile in Bahrain, the outbreak of civil for private equity investments and the going has demonstrations earlier this year has led been equally slow for syndicated transaction in investors to consider the political risk attached the credit space. “There is surplus capital in the to any investment activities in the domicile. To region so yields are down because there is too be considered too much of a political risk to be much money chasing too few opportunities,” awarded a Formula One race by the far from says Shahbaz. And in real estate the demand scrupulous world of motor racing is a among local investors is to invest directly in the damning indictment. properties, not through funds. In contrast, Qatar appears to be more There is a demand among Qatari investors politically stable than Bahrain and perhaps more for small sophisticated investment products but forward-looking than Dubai in its plans to asset managers and investment banks are develop an international asset management somewhat limited in what they are able to offer industry. This is not to say that Qatar does not because of the market’s restrictions, says have its own challenges. While the necessary Shahbaz. “For example, shorting of stocks is framework (international standard regulation; a allowed but there are a limited number of asset technically sophisticated exchange; and solid classes, particularly derivatives.” underlying economics) is all there, a thriving asset There is also an inherent sense of caution management market will not appear overnight. among investors in the region which increased And while it may be relatively easy to entice in the wake of the financial crisis and although international firms to set up a marketing office a corner has been turned in terms of the
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ASSET MANAGEMENT FOCUS
economy’s recovery from the crisis, that sense Investor interest of caution remains. Nevertheless, Shahbaz is ‘Ten to fifteen years ago “The initial investor interest is likely to come confident that the domestic market will develop from large corporate institutions, government over time and this will in turn bring in more Qataris had to go and high-net-worth individuals,” says Robert international investors to the region. abroad to get an Pramberger, acting head of asset management. Much talk has been made of the need for the A lot of capital of the region stays within the QFC Authority to offer some kind of incentives education but now they region, such as government spending on to the international asset management firms can do all of that here’ infrastructure projects, real estate, creating a that it wants to attract to the country but, says financial hub, projects within education and Shahbaz, once a market goes down such a research, sports, medical and hospitality. route, the consequent development can only go The discussions about a possible MSCI so far. “Ultimately, those firms have to believe upgrade of Qatar from “frontier” status to that the market will develop over the long term “emerging” status would improve the flow of and that takes more than just seed capital. capital coming from outside of the region, says “I think organic growth in the banking and Pramberger. “This could bring in around $4bn asset management sector is fine, there is no of new capital. However, the inflow would be need to push things further than they need to spread over a one-year period until be. There is everything here in Qatar for it to implemented.” succeed in the long term – the exchange, the As well as the MSCI upgrade, the other big universities, the level of education is increasing. impetus for Qatar’s financial market was the Ten to fifteen years ago Qataris had to go awarding of the Fifa World Cup 2022. The abroad to get an education but now they can do impact has been felt across the country says all of that here. And more Qataris are working Pramberger. “Real estate and infrastructure now, even the rich ones.” projects that were moving slowly have now been The First Investor (TFI), the largest Qatari given a higher priority and will be completed closed shareholding investment banking firm, is much faster. The underground and tramway owned by Barwa Bank which is planning to go project has started and we can already see the public later this year. TFI’s activities are centred implementation progress. The next ten years on real estate investment, investment banking will be all about completing these and asset management, all in compliance with infrastructure projects.” Shariah laws. TFI Asset Management is In the case of a successful MSCI upgrade in planning to launch the First Investor GCC Qatar, the inflow of new investments should be Equity Opportunities Fund later this year. a positive and generate more trading volumes and increase liquidity on the Qatar Exchange. The momentum has already been picking up in Q1 of 2011, says Pramberger. An increase of trading volumes in Qatar should also be positive for international investors increasing their exposure to Qatar as trading in and out of stocks becomes easier and quicker. Stocks with low liquidity are normally ones which portfolio managers avoid as selling these becomes impossible when markets fall. “We are also likely to see more IPO’s this year and a possible increase of foreign ownership levels,” says Pramberger. Qatar is focusing on attracting new asset managers to set up their base in the country, says Pramberger. “Regulations of setting up asset managers in Qatar are constantly improving. It is also talking about injecting money into asset managers if they are based in Qatar, which in the current market would be a very big incentive. Stability is also one of the best in the region. A telling sign is that credit default swaps spreads are the lowest since the beginning of the year.” fg
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EXECUTIVE INTERVIEW: QFIB
Leaving the frontier behind
Funds Global talks to Emad Mansour of QFIB about the bank’s plans to bring some much needed variety to the sharia funds market through its partnership with Gulfmena
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Qatar First Investment Bank (QFIB) is the first exist. The sharia-compliant asset management independent, sharia-compliant investment ‘A Qatari investor market has not yet penetrated beyond Mena bank to be based in Qatar. It was awarded a [Middle East and North Africa] equities, which licence by the Qatar Financial Centre looking for a sharia- presents a market opportunity for us.” Authority (QFCA) in August 2008 and has compliant fund focused This decade will be known as the decade of 1,200 shareholders and assets of more than emerging markets because there is still a lot of $430m (€297m). on blue chip equities in growth to be captured in those markets. In It is a pure-play investment bank with three the EU will be wasting Europe, growth is stifled because it is mainly main areas of interest – corporate finance; driven by exports and technology, both of direct investments; and asset management. his time. The product which are losing steam. But the emerging “Asset management is an integral part of the does not exist’ markets are driven mainly by demographic investment banking model,” says Emad factors and there is still massive demand for Mansour, chief executive at QFIB. “This is services and products as more of their why we have established a sharia-compliant populations become consumers. asset management firm that will operate within Tebyan will only provide sharia-compliant the QFCA.” asset management products and services, and But given that QFIB is a new bank and does Mansour says that these plans will not be not have an established track record in asset affected by the recent change in regulation from management, it has partnered with another the Qatari Central Bank. “I am not sure how firm (Dubai-based Gulfmena Alternative the market will change as a result of these Investment) to set up Tebyan. “What we bring changes. Essentially it means that banks cannot is sharia structuring know-how, while our dabble in both markets (the sharia-compliant partners bring a track record in asset and the conventional). Banking assets with management. It was a synergy we had to have.” those banks that are now banned from sharia The first fund to be launched by Tebyan will banking will not disappear, says Mansour but be a sharia-compliant equities fund aimed at “will just move somewhere else”. China, India and the Middle East. “We are As the Tebyan venture grows, Mansour hopes targeting this area because we see it as being full that the fund managers involved will be Qataris of potential growth and we also believe this will based in the country but currently it is not so be the first sharia-compliant fund to be easy to find Qatari fund managers who are launched based on equities in these markets.” experienced in covering the Mena region. But The fund will primarily target high net worth he hopes that as this industry develops and the individuals as well as institutional investors and various education initiatives continue, there will with a minimum investment requirement of be a growing appreciation of the industry and a $100,000. “We see no reason to limit the greater understanding of the importance and number of investors by raising the entry level,” the rewarding nature of the fund manager’s says Mansour. role by young Qatari’s. Tebyan intends to come up with a series of products to satisfy a variety of demands within Status upgrade the sharia asset management market, a market The MSCI status upgrade for Qatar from that Mansour believes has been poorly served “frontier” to “emerging” will encourage more thus far. “For example, private equity as an asset interest although it is not certain whether this class is not for everyone, not least because of the interest will turn into solid investment. “This high entry level (around $1m). And you won’t decade will be known as the emerging market get any decent returns from real estate unless decade and with Tebyan we want to capture the you invest directly. That just leaves the equities trends of the next few years through sharia asset class for those investors who don’t have compliance. As the market grows, we can cover very deep pockets.” the Mena region from Doha. The Chime fund There is also a lack of access to international is already subcontracted to a Hong Kong markets when it comes to sharia funds, says manager for the China part of the fund. We Mansour. “The weakness of the sharia funds also have an in-house fund manager that will market is the lack of variety. Investors have to focus on India and then the Mena part will be travel far to get exposure to different markets. So managed by our Mena specialists.” for a Qatari-based investor, for instance, looking But Mansour is aware that “emerging to find a sharia-compliant fund focused on blue markets” is a very broad term that can relate to chip equities in the EU, for example, will be a whole host of different markets. And investors wasting his time as the product simply does not may be somewhat wary of having anything to
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EXECUTIVE INTERVIEW: QFIB
do with the Middle East right now. The civil to differentiate itself from its neighbours, unrest that has emerged in varying degrees ‘From an economic particularly Saudi Arabia which is by far the across the region in Egypt, Bahrain, Syria and biggest market and Dubai which has been Libya will have created some short-term perspective, what is promoting itself internationally for much wariness among investors but Mansour is happening is good news. longer? It is important to note, says Mansour, confident that the developments will prove to that international fund managers looking to be positive for the Mena region in the medium So much economic establish a presence in the region actually to long term. potential has been have a choice, but how do you get them to “From an economic perspective, what is pick Doha? happening is good news. So much economic blocked by politics and “You can have incentive packages structured potential has been blocked by politics and now now it can be set free’ around tax holidays, for example, and you can it can be set free. It will take time for those also promote a comfortable lifestyle for countries to stabilise, and we are optimistic that those professionals that will be relocated here they will. I expect Western institutional by their employers. But the big challenge is investors such as endowments and pension how to kick-start the whole thing. The challenge funds in the EU or the US to seriously look at for the QFCA is that a lot of fund managers deploying investment capital in the Mena have already set up their base in Dubai region in the medium term.” because five years ago there was only one Developments in Qatar’s financial services destination of choice. Now that these fund industry are helping to attract the interest of managers have established their livelihoods in international investors and managers, says Dubai, bought property, put their children Mansour. “There are professional checks and through school there, it will be a challenge to balances within the regulatory framework that get to them to relocate.” should give confidence to investors on the way in But there are actions that Qatar can take which their funds are being handled and to overcome the first mover advantage of invested. The QFC is very forward thinking and Single currency places like Dubai, such as the offer of seed proactive. They walk you through the setting-up The potential catalyst for a thriving capital capital or free office space for a year or two for process. We have worked with several markets in the GCC region is a single currency, instance or some other incentive package that jurisdictions in the GCC and the QFC was a says Mansour. “Once there is a single currency, would attract fund managers. “If you are last to breath of fresh air. This approach was especially consolidation in the capital markets will be market, you have to create your own helpful to us because we were starting from a inevitable and the formation of a single competitive advantage. The offer of seed blank sheet and did not have a parent bank to exchange that will be deep and liquid will not capital could at least put Qatar on a list of rely on yet we still had funds invested from more only attract international institutional investors possible choices for fund management firms than 1,200 shareholders to look after.” but such a market will, more importantly, allow and perhaps those that are already set up in While the QFC Authority has been successful them the opportunity to liquidate and exit other domiciles, Bahrain or Dubai in particular, in setting up a streamlined registration process investment or trading position at will.” might be induced to make a move.” and supportive infrastructure, developing an Mansour is aware that there is some The offer of seed capital and similar initiatives active and liquid securities market has proved scepticism as to how much willingness there is can be seen as simply throwing money at the more elusive, as it has for all the domiciles in the in a convergent Mena or GCC market but he problem – an accusation that is often levelled at Mena market. For example, the Qatar likens the situation to what we have seen on the the Middle East – but Mansour says that the exchange has a highly advanced technology streets of Tunisia, Egypt and Libya. “You QFC Authority should not be ashamed of such platform and the backing of NYSE Euronext cannot deny reality, it will happen through the a strategy. “Tax holidays, development loans but is still struggling to attract meaningful forces of nature and the biggest force will be the and subsidies of various natures are all liquidity. “This part of the world will always be single currency. Saudi Arabia will be the biggest incentives that have been used elsewhere in the a net exporter of capital and the Mena driver and there could be issues around the loss world to ignite the economy and generate economies (collectively) are not large enough, of sovereignty when it comes to regulating an critical mass in certain industries. yet, to absorb all the wealth that is being overall encompassing capital market but, in the “Such incentives can be structured so that you generated here,” says Mansour. long run, convergence of capital markets will will only qualify if you bring a certain level of “There is room to improve the depth of become inevitable. Once there is a single resources and know-how to the area, such as the the markets but unfortunately that is not a currency, the regional asset management fund management expertise or even the whole decision the exchange can take, it can only industry will have a place on the world stage, operations and not just a satellite sales office. In put efficient listing and trading structures in regulation will be of international standard and time, as the fund management infrastructure place to attract and encourage listings, but it is the markets will become more attractive as they develops, and as the asset management industry private companies and family owned businesses become deeper and more liquid. develops, firms will want to be here in Doha to that need to make the choice of to list or But should the Middle East become one take advantage of world-class services and not to list.” converged market, how will Qatar be able facilities that are offered by the city.” fg
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EXECUTIVE INTERVIEW: AXA IM First move advantage
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Funds Global talks to Stephane Battistella of Axa IM Qatar about being the first international asset manager to establish its Middle East headquarters in the country
Axa Investment Managers (Axa IM), a multi- solid and traditional themes, the level of expert investment manager backed by the Axa ‘Real estate is an asset sophistication among investors is reasonably Group, was the first international asset manager high says Battistella. to open a fully licensed fund manufacturing class that suits local “Don’t forget that for the last 20 years, centre in Qatar when it applied to the QFC investors’ mind-set so an international bankers have been coming over to Authority for a license in 2006. the Middle East with an empty suitcase and an The decision to open an office in the Middle open-ended real estate investment idea, hoping to take some of the East was an increasingly common occurrence fund may be attractive, region’s cash back with them. So the local among international asset managers. However, investors have been exposed to a broad range of the majority of managers had hitherto opted but to go from deposits sellers and bankers.” for Dubai rather than Doha. “We had a desire to investments is a The financial crisis has, of course, lowered the to do things differently and not to follow the region’s risk appetite somewhat and high same path as every other international asset challenge’ inflation has created some challenging manager,” says Stephane Battistella, director, economic conditions, but the Middle East has distribution Middle East at Axa IM Qatar. “And always taken a long-term view to business in Doha, like few other places in the region, had general as well as its investments, says all the logistical support we needed which is Battistella. “It can take a long time to develop very important when you are covering a region trust. Investors are not just looking for a brand, from one office.” they are also looking for evidence of longevity The QFC Authority also made a very and of a long-term commitment.” compelling case in 2006 when Axa IM was In terms of the investment industry, there is a canvassing the various development authorities predominant brokerage culture where investors in the region, says Battistella. “There was a are more used to buying stocks rather than good logistical and infrastructural framework investing in funds and this is the challenge from which we could operate an office that facing investment managers, says Battistella. would act as a hub for the Mena region. The “We need to educate the market to a degree point was not to have to open five or six offices about the benefits of an investment solution. It to cover the Middle East.” does not matter if that solution is a fund or a capital-protected warranty scheme, potential Great expectations investors will want to see the benefit behind it. Business has grown in line with expectation, Yield, liquidity and visibility are what appeal to says Battistella, even with the impact of the local investors and the key to providing that is financial crisis, and he puts this down to the asset management. If it was just a case of firm’s stable structure and insurance investing in a few stocks, our expertise at background. “We only deal with institutional constructing portfolios would not come into it.” investors and we do not have any banking operations so there are no issues with Chinese Local understanding walls or information leakage. The financial crisis may prove to be a useful “Clients have three expectations from us – development in that it will enhance local yield, liquidity and visibility. These properties investors’ understanding of volatility and were in demand before the financial crisis but perhaps convince them that an investment are especially so now as clients look beyond a solution such as a fund can meet their needs focus on products and performance. We are not better than a simple stock market purchase. in the gimmicks game.” “Real estate is an asset class that suits local There are three areas of interest to investors investors’ mind-set so an open-ended real estate in the Mena region, says Battistella – yield, fund may be attractive, but to go from deposits tangible assets (such as real estate and listed, to investments is a challenge. This is where a physical commodities that can help reduce the good asset management firm should be able to exposure to the energy sector); and the long- help by offering a breadth of expertise to cover only equity space. Despite this interest in such any change in asset class preference and to
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EXECUTIVE INTERVIEW: AXA IM
provide solutions that will have long-term Co-operation Council (GCC) countries from benefit and are not just products of the week.” ‘The country has seen its frontier markets to emerging markets would be a Choosing the right intermediaries is also welcome development for new investment into important, especially in the wholesale market, profile rise considerably the region from passive-index linked to actively and Axa IM runs a series of workshops for local in recent months thanks managed pooled vehicles. It would also help intermediaries. “Sharing what we do is Qatar to develop its fixed income market by important because ultimately it is about what to the successful bid to driving more asset allocation to the region from you put in the basket and not the product itself. stage the 2022 Fifa international investors. “I think a more There is a local market developing and there is developed fixed-income market would be very also increasing asset allocation in the region World Cup’ good for the region,” says Battistella. from the international investment community. The upgrading to emerging market status As an international player, it is important that may also bring more international investment we make room for both. But, ultimately, in the managers to Qatar to set up their own fund asset management world it is about sticking to manufacturing base. In the five years that Axa what you are good at.” IM has been in the country, few other asset Liquidity is an important aspect for managers have followed their example. “For international investment in the region and in that any manager that has already set up a Mena respect the upgrading of Qatar and other Gulf office elsewhere in other GCC countries, it may
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be unlikely that they would want to move it or way to what has been seen in the region over to set up an additional office. But new players ‘I think a more the last decade is evident not just in the financial setting up in Qatar would only benefit the sector but in Qatar in general, says Battistella. market here.” developed fixed-income Clearly, the country has seen its profile rise market would be very considerably in recent months thanks to the Regulatory demands successful bid to stage the 2022 Fifa World Cup The regulatory environment can be good for the region’ as well as other successful events involving the demanding, says Battistella, but it is also in line elite from the world of tennis and golf. But with the expectations of local investors and is there has also been a concerted effort to develop still very consultative rather than aloof and facilities designed for families and not just the inaccessible. “There is a strong focus on ex-patriot, bachelor lifestyle often presented to expanding the market and engaging with the Westerners working in the Middle East market, but there is still a high level of “Doha has changed a lot in the last few years – compliance required.” there is far more to do and see as a family. There And following the financial crisis and the fate are more schools, sporting events, film festivals, of neighbouring Mena domiciles, this focus on museums and the cultural village. There are sustainable growth is likely to continue. things happening all the time and it is becoming The desire to develop the market in a different a place to bring your family to and to live.” fg
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QATAR APPLICATION PROCESS
Business development process map for asset management firms Dealing in investments as a START principal CAT 2
Dealing in investments as Meeting with strategic agent CAT 3 development team
Determine the type of activities
Strategic fit Custodial services review to CIS CAT 2 or 3
Not fit Fit
Discourage Encourage from the firm to applying apply Advising & arranging CAT 4
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Application/annual fee: US$ 20K
Authorised individual Registration fee: US$ 500
Base capital requirement: Complete form US$ 2M Q02 & Q03 Q18 for collective investment fund
Application/annual fee: US$ 10K
Authorised individual Dialogue with QFCRA Registration fee: US$ 500
Base capital requirement: US$ 500K When authorised Application process
Application/annual fee: US$ 10-20K
Authorised individual registration fee: Licensed and registered US$ 500 END with QFC Company Registration (CRO) Base capital requirement: US$ 10M
Application/annual fee: Other Fees US$ 10K • Scheme registration fee US$ 2K Authorised individual registration fee: • Registered scheme annual fee US $ 500 per fund US$ 2K
Base capital requirement: • Umbrella scheme and US$ 250K sub-schemes US$ 2-10K
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REGULATION Ready for business
The regulatory environment is a key factor for any firm considering new jurisdictions. Funds Global talks to George Pickering and Shaun Swan of the QFCRA about the new rule book, risk-based regulation and a streamlined registration process
The Qatar Financial Centre Regulatory Authority (QFCRA) was set up as the ‘I think the new rules independent regulator for the QFC in 2005 as part of Qatar’s objective to establish a financial send a clear message system with world-class regulation. The that we are open for QFCRA’s objectives include the promotion and maintenance of efficiency, transparency, business and have a integrity and confidence in the QFC as well as clearer and more the maintenance of financial stability and reduction of systemic risk. streamlined process for The QFCRA is also responsible for setting up within the developing policy for the Qatar market alongside its supervisory role. This role has QFCA. And we have become more prominent since a reorganisation received a lot of interest’ of the regulator’s legal, policy and enforcement functions in 2009 in order to align it better with the strategic priorities of the QFC. As a result, the Policy, Enforcement and Risk team was • allowing foreign funds to be marketed to separated from the QFCRA’s legal function. retail customers; In February 2010, the QFC unveiled its plan • allowing the custodian of a QFC collective to develop Qatar as a global hub for the asset investment fund to also perform management business, alongside reinsurance administrative functions for that fund. and captive insurance. The strategic prominence granted to the asset management International interest sector led to the QFCRA to issue a consultation The last of these areas reflects the increased paper on making amendments to its rule book. interest from international custodians and asset The previous rule book for Collective servicing firms in establishing a presence in Investment Funds (CIF) had not been overly Qatar. State Street is already there and JP successful and had resulted in few applications, Morgan looks set to join them. Pickering says George Pickering, managing director, believes the arrival of these asset servicing firms Policy, Enforcement and Risk. “There was a will dovetail well with the growth of the funds need to simplify and strengthen the regulatory market. “We are looking for firms to provide process so that current and future participants fund administration. The aim is to safeguard could have full confidence in the system.” assets but also provide more advanced services, Following the consultation period, new rule such as daily Navs [net asset values]. The rules books for CIF and Conduct of Business became allow for that but it is a question of seeing effective as of 1 January 2011. The changes whether there is a demand for this.” focused on four areas within fund management: In addition to these changes, the new rule • allowing authorised firms within the QFC to books also covered private placement, allowing operate foreign funds; for greater involvement of private equity and • establishing a regime for QFC-registered hedge funds within the QFC, another area of retail funds; increased interest. “I think the new rules send a
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clear message that we are open for business and firms which is regulated by the Qatar Central within the UK and the European Union. It has have a clearer and more streamlined process for Bank (QCB) and the other is the QFCA which built up its expertise by employing staff from setting up within the QFC Authority. And we is aimed at firms with an international focus, be these international jurisdictions and, says have received a lot of interest,” says Pickering. that overseas firms looking to set up in Qatar or Pickering, is well placed to capitalise on the “There are a lot more firms looking at Qatar-based firms looking to attract investment growing international interest in Qatar. registering their own funds within the QFC from overseas. Authority,” adds Pickering. “Most of this activity The funds industry has not flourished within Local jobs is coming from the QIF and private equity the QCB-supervised regime which has Aside from the attraction of international funds, but there is also significant interest in concerned itself primarily with the banking interest, the regulatory changes are also marketing funds for the retail space which has sector. Regulation has been prudent and designed to create more jobs in Qatar. In been quiet up to now but will develop in time.” cautious but this has resulted in underwhelming previous years there was more of a suitcase One notable aspect of the financial services levels of interest in funds. Conversely, the banking/PO Box approach to investing in the industry in Qatar is the fact that there are QFCRA’s regulatory model is more based on region but it is hoped that there will be a greater essentially two regimes – one is for state-based international standards such as that practiced physical presence from international firms and
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REGULATION
this will in turn encourage greater involvement establish, then it should be possible to get their from Qatari-based investors and also ‘The economic story is proposal properly arranged and aligned. The prospective professionals. application process is very consultative and the “There is a lot of institutional and individual very good and the more certainty there is in the application, the wealth in Qatar and a flourishing asset infrastructure is here. easier that consultative process becomes.” management business would be a good way to Beyond the initial registration stage, the invest this wealth,” says Shaun Swan, associate We have a graduate ongoing regulatory process should also be director at the QFCRA. “Furthermore, we fellowship programme made easier for firms by the recent hope that firms will choose to have a physical implementation of an electronic submission presence here. The economic story is very good designed to get more system for regulatory filings that covers and the infrastructure is here. We have a Qataris actively involved prudential returns and applications for graduate fellowship programme designed to get approved individuals. According to the more Qataris actively involved in the industry.” in the industry’ QFCRA, the new e-submission platform will There is also a desire to have more local improve the efficiency of the regulator, lighten professional services firms established in the the administrative load for QFC firms and help QFC, especially on the legal side, says Swan. the QFCRA reach its goal of being at the “There are numerous international law firms forefront of best regulatory practice. now established in Qatar but we are also trying The QFCRA has also attempted to adopt a to get more local law firms involved so that the more risk-based stance on regulation, says professional services infrastructure combines Swan. This involves taking both a micro- both domestic and international expertise.” prudential approach with on-site visits and also As well as the assurance of a regulatory than months,” says Swan. “For any prospective a macroprudential approach by looking at the regime that meets international best practice, applicants, the smartest approach would be to risk profile of firms and ensuring that they are firms looking to establish new funds in Qatar have the licensing and registration processes all not overly exposed to particular sectors, such as will be looking for a simple registration process. lined up so that we could look at them in real estate. The first step in this process is to be parallel. And the more detail there is in the All in all, the QFCRA is confident that the incorporated. As in most other jurisdictions, the original application, the quicker the process changes enacted over the last three years have length of the process is dependant on the generally is.” created a world-class regulator environment complexity of the business involved. A simple So what makes a strong applicant? “A good that international firms would understand on business model can be incorporated relatively commercial history and a good regulatory arrival there. quickly. There is also an overlaying CIF record are important, particularly if the track- “The new rule book is in place. We have registration to complete for the establishment record relates to the business they want to set clarified the types of funds and the types of of a fund. up. We also look at the quality of the investors that we are looking to bring into the presentation and any consequent discussion.” market. And we have strengthened our Strong applications There are things that can be done before capacity. We have had three briefing sessions “If it is a firm we are familiar with, and if it is a getting to the application process, says Swan. about the new rule book and that has resulted strong applicant and the fund is not overly “If a firm is already based in the QFC and if it in strong interest around a range of possible complex, then the process can take weeks rather is certain about the business it wants to investment schemes,” says Pickering. fg
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QFCA TAXATION It doesn’t have to be taxing
Ian Anderson, head of tax at the QFC Authority, explains the new taxation regime and what it means for international firms looking to establish asset management operations in the country
The latest Qatar Financial Centre (QFC) tax The ruling is binding on the tax department payment of interest, dividends or royalties. regime was effective from 1 January 2010. The but does not prevent the taxpayer submitting Qatar also has an extensive and growing regime imposes a 10% tax on the profits of a return on an alternative basis. This facility network of double tax agreements, including the firms licensed with the QFC, based on has already been utilised by a manager of UK, France, India, Russia, Switzerland, the their Qatari (local source) profits. The QFC is a fund requiring certainty of tax treatment Netherlands, Malaysia and Singapore. not a tax haven, and has no intention of before publishing the marketing prospectus for Overall, the QFC tax regime becoming one, but 10% is an internationally a new fund. supports the positioning competitive rate of tax. There is no personal of the QFC as an income tax in Qatar. attractive location in The tax regime was designed to be attractive which to do business to international financial services companies, in an environment of delivering a high degree of certainty with clear ‘The tax regime tax clarity, certainty regulations and transparent administration. was designed to and transparency. fg Returns are filed on a self-assessment basis with both the return and payment of tax due to be be attractive made within six months of the relevant to international accounting date. Enquiries have to be raised by the tax department within twelve months of financial services filing, otherwise the return is agreed by default. companies’ Tax losses can be carried forward without limit of time to offset against future profits from the business, and group relief is available for companies within the QFC with a 75% ownership relationship. Losses cannot be carried back. There are no capital allowance provisions but deductions are allowed for commercially calculated depreciation charges.
Asset management operations Companies opening up operations as asset managers will also be subject to tax at the 10% rate. However, the profits of a fund registered in The QFC is also a the QFC, and most other funds managed by a good holding company QFC Entity, will be completely exempt. There location for a fund are no withholding taxes on the distribution of manager looking to profits out of the fund, regardless of the establish a base for location of the recipient. the development of The tax department offers a tax ruling business across the facility which enables taxpayers to obtain an region. There is a advance ruling on planned transactions, participation exemption or possibly on general areas of business for both dividends received activity, which will benefit the taxpayer by from subsidiaries and any capital giving certainty on the transactions covered by gains from their disposal. There are the ruling. no withholding taxes on the
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INSURANCE Platform games
Funds Global talks to James Sutherland, CEO of Qatarlyst, about the growth of the insurance business in Qatar and what it means for the asset management industry
In addition to its paronomastic properties, The next stage for Qatarlyst is to add the engagement with the local market and by the Qatarlyst also illustrates the Qatar Financial claims process to the platform – the technology end of 2009 had 25 customers. This had grown Centre Authority’s desire to exploit the latest is ready, says Sutherland, but it would be better to 60 customers by the end of 2010. “We have technology in its attempt to develop a thriving to have a larger user base before rolling it out. had a very positive reaction but we are looking financial services market. Qatarlyst is an The final stage would be the development of a to increase the user base because we need a electronic platform designed to bring buyers settlement service. high number of users for the platform to be and sellers of insurance together in one secure, Qatarlyst had set about a programme of useful to local brokers.” web-based location. The genesis of Qatarlyst was formed back in 2007 when the QFC Authority was considering a new strategy that involved the reinvention of its insurance and reinsurance market. The QFC Authority was looking at what could be done to attract more underwriters and brokers to Qatar and to differentiate it from other jurisdictions in the region. It was felt this could be achieved through technology – to connect Qatar with the rest of the Gulf Co-operation Council (GCC) members and the international market. The project started to take shape in 2008 – the long-term goals were developed and a technology supplier was selected. “We acquired a system, E-Insure, that was already tried and tested in the market rather than build our own because we wanted to move quickly,” says James Sutherland, chief executive at Qatarlyst. The platform’s operating model is a simple one based on the establishment of an online marketplace for insurance, reinsurance and Takaful contracts. The objective is to have the entire process – from the original request for quotes, the resulting quotes, the contract negotiation and the placement through to the processing of the final endorsements – all take place on the Qatarlyst platform. “It is a logical structure based on creating one single version of the truth that can be accessed from one destination,” says Sutherland. The platform also reflects the growing demands of an industry that is becoming more professional in its procurement processes and more familiar with the benefits offered by such online marketplaces. “They want procurement platforms that are sophisticated.”
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In order to widen the platform’s exposure, ‘It is a logical structure Qatarlyst decided to amend the functionality so that brokers looking for a reinsurer could invite based on creating non-members on a read-only basis, meaning one single version that they could download the various tenders and RFQs on the platform but could not of the truth that respond through the platform. can be accessed from Despite the encouraging growth over the last two years, a tipping point still has to be reached one destination’ says Sutherland. “We still have to reach the stage where customers are coming to us to join the platform rather than the other way round. We are well established among the 160 brokers, insurers and reinsurers operating in the United Arab Emirates with most companies now signed up but with the service yet to be rolled out to many of them.” Qatarlyst acquired the UK-based IR3K platform earlier this year, an acquisition that was based on two fundamental reasons, says Sutherland. “First, it gave us access to a wider market, particularly in London and Bermuda, and saw our customer base grow from 60 to 300. The acquisition also gave us immediate access to new technology and the ability to develop new functionality ourselves.” It has also given Qatarlyst a base in the heart of the oldest insurance market in the world, Lloyds of London. “Having our premises in London gives us a magnificent opportunity to send staff over from Qatar to learn about the business and to have regular visits from London staff. Encouraging this two-way movement is an important part of the relationship between London and Qatar.” The usual path for Western involvement in the emerging markets is for big international firms to plant an office in Qatar and send its staff over in batches, says Sutherland. “We have done it the other way – by acquiring a company based in London and sending our own staff over. It is also in part a branding exercise to build the Qatar name. Shortly, once the integration work is complete, the Qatarlyst platform will be sitting on desktops in the biggest and oldest insurance market in the world.” A single management team comprised of both Qatar and London-based staff is the eventual objective for Qatarlyst, says Sutherland. “There are lots of areas where we can collaborate and share knowledge and I think that extends to other industries and not just insurance. For example, I see no reason why the asset management industry cannot have the same approach.” fg
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QATAR EXCHANGE Tackling the liquidity challenge
Qatar boasts a state-of-the-art stock exchange but little liquidity at present. Funds Global talks to Mohsin Mujtaba about QE’s plans to bring more participants to the market
Qatar’s financial markets saw a pivotal year in Finding a level of activity and depth of 2009. The Qatar Financial Centre Authority liquidity to match the platform’s capacity and and the The Qatar Financial Centre Regulatory ‘Ever since the World capability has been harder to achieve for the Authority launched a new, three-pronged vision Cup, there has been a exchange but this may well change, thanks to for the development of the market based on the events of 2 December 2010 when FIFA insurance, investment banking and asset tendency to encourage president Sepp Blatter announced the awarding management. And the local exchange entered foreign investment as of the 2022 World Cup to Qatar. “We are in a into a partnership with NYSE Euronext. As a different market from two years ago,” says result of this merger, the Qatar Exchange much as possible’ Mohsin Mujtaba, director of product and (QE) was equipped market development at the Qatar Exchange. with a state-of-the-art The momentum from the World Cup, trading platform. combined with the anticipated MSCI upgrade of Qatar from “frontier” to “emerging” market will see the level of interest rise by $4bn (€2.7bn) in incremental capital, suggest sources. How quick this influx of international investment funds will be, remains to be seen. It is most likely that the inflow of investment capital will arrive in stages but even
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if there were to be a concentrated surge of offerings. Qatar Airways announced earlier initial capital, Mujtaba is sure that capacity will this year that it will be going public in not be an issue for the exchange given the ‘A clear structure in the 2012. According to Mujtaba, there is a robustness of NYSE Euronext’s Universal underlying market has missing link. Trading Platform and the subsequent post- “The majority of businesses in Qatar are trade enhancements. to be in place in order to family-owned and are used to running things ensure robustness and to themselves. Once a company becomes publicly Foreign ownership limits listed there is a fundamental change to The only issue that might hold back trading attract a diverse range the boardroom and corporate governance volumes is the foreign ownership limit placed on of participants’ requirements. I think the asset management listed firms which is currently under discussion in industry can help in that transition through, for terms of being increased from the current 25% example, a private equity arrangement rather to a higher level. “Except Saudi Arabia, all GCC than going directly to public status. This would [Gulf Co-operation Council] countries are open allow the company to bring certain people in to to up to 49% of direct foreign investments, but make it better prepared for a fully public status.” at this stage any increase is good. $4bn (€2.8bn) The exchange plans to launch a bond market can easily be accommodated even if it is only in the near future, says Mujtaba. “We are seeing 30% of market cap, but if it is higher, it will be more corporate debt issuance. Issuers have future proofed so that we don’t hit a ceiling,” says traditionally been tapping into capital listing Mujtaba. “Ever since the World Cup, there has in Luxembourg, but issuing a local bond been a tendency to encourage foreign listed in Qatar is more attractive to local investment as much as possible.” investors and issuers.” There is more interest in initial public offerings (IPOs). “The sentiment has changed dramatically since 2 December. With the expansion work that will come with the World Cup, the companies will need to increase their capital base, so we have seen more interest in IPOs and more lobbying from local firms to have joint ventures with international corporates.” As the market opens up, there will be a need for firms to increase their capital base and Mujtaba hopes that this need will translate into a growing number of IPOs. The exchange has a listings department and has actively pursued more public
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QATAR EXCHANGE
Derivatives project “The changes will bring state pensions funds, There is also a plan to develop a derivatives ‘A number of financial mutual funds and other professional traders market. While this may seem an ambitious into the market which in turn will bring in project for an exchange with such a modest institutions that more issuers. Once we have these different level of liquidity, Mujtaba says that Qatar can attracted a lot of investor classes, it will create the ability to hedge benefit from second mover advantage. “We and to engage in arbitrage and we can then have seen a lot of other exchanges launch a investor interest in a look at exchange-traded funds and listed derivatives market and fail. What we have short time have already real estate funds. Once we have achieved this learned is that a clear structure in the in the cash market, we can then add a underlying market has to be in place in order to hit the ceiling for derivatives market.” ensure robustness and to attract a diverse range foreign ownership’ With the Universal Trading Platform system of participants.” in place, technology is the least of QE’s It is, therefore, essential that a series of cash problems. And the work has already begun to market reforms are in place before the launch address the legal and regulatory issues involved of a derivatives market. Under the exchange’s with establishing a derivatives market. The plan, covered short selling will be allowed, as biggest challenge is in launching the right will margin trading, and a liquidity provision product and ensuring that the underlying scheme will be launched. Ongoing changes to market conditions are there. the exchange’s rulebook will also be made in Another challenge that the QE has to order to cater for international trading models negotiate in order to attract more liquidity is the and for practices such as securities lending. growth of the depository receipts market, which “The strategy has made sense to us for a long allows Mena-based companies to raise capital time and now it is starting to make sense to from international investors via listings in the everyone else,” says Mujtaba. United States and Europe. Typically, these instruments have appealed to investors because they can get the exposure to the emerging markets without having to run the risk of listing on the local exchanges where there can often be problems with settlement cycles and clearing processes. Thanks to its high level of technology, the clearing and settlement process should not worry prospective international investors but a low level of liquidity does make it harder for them to move their positions and creates the concern that they will find themselves locked into the market;
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hence the attractiveness of the much more in 2008 with a balance sheet of $100m and has liquid depository receipts market. ‘Everything is coming an asset management arm that is managing mandates in excess of $3bn. The fund, which is Liquidity challenge forward, not just oil wholly owned by Qatar-based bank Masraf Al So how does QE intend to respond to this and gas. Investments Rayan, has benefited from the new asset challenge? One option would be to introduce management strategy launched by the QFC some regulatory restrictions on Qatari-based are being made in Authority in 2009. The dual arrangement firms seeking depository receipts but Mujtaba is all sectors’ whereby the parent bank operates under the not in favour of such intervention. “We do not supervision of the Qatar Central Bank and the want to put any barriers in place,” says ARI fund operates within the QFC Authority is Mujtaba. “If GDRs [global depository receipts] a model that Mujtaba expects other institutions on Qatari-listed companies are listed elsewhere to follow in order to gain the full benefit of then it only helps towards a better image and Qatar’s development strategy for the financial the credibility of our market.” services industry. Commercial Bank, for example, was the first Local asset managers and banks will also Qatari-based bank to issue a global depository benefit from the development work taking place receipt offering ($700m), which it did in 2008 across all industries such as healthcare, on the London Stock Exchange. And more infrastructure, entertainment, education and recently in November 2010, the bank also culture, says Mujtaba, as Qatar looks to develop issued a Swiss Franc Bond offering on the SIX a diversified and sustainable infrastructure. Swiss Exchange. “A number of financial “Everything is coming forward, not just oil and institutions like Commercial Bank that gas. Investments are being made in all sectors.” attracted a lot of investor interest in a short time This is a statement that Mujtaba no doubt and have already hit the ceiling for foreign hopes to be making in reference to the QE ownership (25%). So the decision to list over the next few years in line with the elsewhere is because it wanted to raise $1bn in expectation of more trading activity, deeper capital and decided that it would be more liquidity and a more diverse range of comfortable doing that in another jurisdiction.” participants. It is a challenge that it is hard to Mujtaba is still confident that the infrastructure underestimate, not least because nothing begets in place at QE, the enhancements in the liquidity like liquidity, but it is difficult to post-trade environment and implementation of imagine what more QE the Universal Trading Platform system, could do. The rest is now direct market access and connectivity into NYSE down to the market. fg Euronext’s SFTI network, allied with the increased investor interest that will result from the MSCI upgrade will eventually reap dividends and prove attractive to Qatar-based investment houses. He points to the example of Al Rayan Investments (ARI) a GCC fund launched
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QATAR LICENSED FIRMS LISTINGS QFC Authority Licensed firms
Firm Name Date of License Permitted Activities Arab Jordan Investment Bank (Qatar) LLC 05/12/2005 Regulated Activities Qatar Holding LLC 04/04/2006 The business of a Holding Company Credit Suisse (Qatar) LLC 01/03/2006 Regulated Activities Arab Law Bureau LLP 20/03/2006 Professional Services (Legal) AXA Investment Managers LLC 23/04/2006 Regulated Activities QREIC Sukuk LLC 10/07/2006 Regulated Activities PricewaterhouseCoopers - Qatar LLC 21/08/2006 Professional Services (Assurance, Advisory, and Tax) Eversheds LLP 24/08/2006 Professional Services (Legal) Eversheds Legal Services (Qatar) LLC 24/08/2006 Professional Services (Legal) Lalive in Qatar LLP 31/08/2006 Professional Services (Legal) Bell Pottinger Communications Limited 31/08/2006 Professional Services (Public Relations) Barclays Bank PLC 10/09/2006 Regulated Activities Morgan Stanley & Co International plc 12/09/2006 Regulated Activities UBP (Qatar) LLC 31/10/2006 Regulated Activities International Legal Consultants LLC 13/11/2006 Professional Services (Legal, Companies, and Trust Administration) AXA Insurance (Gulf) BSC 19/11/2006 Regulated Activities and Professional Services Region Holdings LLC 11/12/2006 Professional Services (Strategic Consultancy and Administrative Consultancy) EMIRATES NBD PJSC 12/12/2006 Regulated Activities Bank Audi LLC 21/12/2006 Regulated Activities Alpen Capital Investment Bank (Qatar) LLC 21/12/2006 Regulated Activities Clyde & Co LLP 27/12/2006 Professional Services (Legal) International Mercantile Exchange Holdings LLC 27/12/2006 The business of a Holding Company Deutsche Bank AG Doha (QFC) Branch 28/12/2006 Regulated Activities Badri and Salim El Meouchi, LLP 28/12/2006 Professional Services (Legal) QIC International LLC 12/02/2007 Regulated Activities CHARTIS MEMSA Insurance Company Limited 18/02/2007 Regulated Activities American Life Insurance Company (ALICO) 26/02/2007 Regulated Activities Qtel International Investments LLC 01/03/2007 The business of a Holding Company Sayel M. Daher Law Offices LLC 11/03/2007 Professional Services (Legal) Morison Menon Chartered Accountants LLC 18/03/2007 Professional Services (Audit, Accounting, and Consulting) ICICI Bank Limited 21/03/2007 Regulated Activities Citibank, N.A. 31/03/2007 Regulated Activities Crédit Agricole Suisse (Qatar) LLC 31/03/2007 Regulated Activities Al Rayan Investment LLC 03/04/2007 Regulated Activities The Royal Bank of Scotland plc 04/04/2007 Regulated Activities WongPartnership LLP 22/04/2007 Professional Services (Legal) QINVEST LLC 30/04/2007 Regulated Activities TAIB Bank Qatar LLC 16/05/2007 Regulated Activities Accenture Middle East BV 20/05/2007 Professional Services (Consulting and Business Process Outsourcing) KPMG LLC 24/05/2007 Professional Services(Audit, Tax, and Advisory) BMI BANK B.S.C(c) 28/06/2007 Regulated Activities Goldman Sachs International 09/07/2007 Regulated Activities Doha Bank Assurance Company LLC 16/07/2007 Regulated Activities GlobeMed Qatar LLC 08/08/2007 Professional Services (Third Party (re) insurance Administration) Nasco Karaoglan Qatar LLC 08/08/2007 Regulated Activities Rödl Consulting Middle East LLC 09/08/2007 Professional Services (Consulting) CORECAP MERCHANT BANK LLC 28/08/2007 Regulated Activities Qtel International LLC 28/08/2007 Company Headquarters, Management Offices and Treasury Operations SNR Denton & Co 09/10/2007 Professional Services (Legal) Industrial and Commercial Bank of China Limited 31/01/2008 Regulated Activities Zurich International Life Limited 08/11/2007 Regulated Activities EFG-Hermes Qatar LLC 13/12/2007 Regulated Activities Bank Sarasin-Alpen (Qatar) LLC 17/02/2008 Regulated Activities Sumitomo Mitsui Banking Corporation 08/03/2008 Regulated Activities McNair Chambers LLC 08/03/2008 Professional Services (Legal) Union National Bank 08/03/2008 Regulated Activities Reed Personnel Services Qatar LLC 13/03/2008 Professional Services (Recruitment Consultancy) DLA Piper Middle East LLP 31/03/2008 Professional Services (Legal) CCL Qatar LLC 31/03/2008 Professional Services (Consulting)
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Firm Name Date of License Permitted Activities BLOM Bank Qatar LLC 07/04/2008 Regulated Activities Cunningham Lindsey Qatar LLC 19/05/2008 Professional Services (Loss Adjustment) Samba Financial Group 25/05/2008 Regulated Activities Beltone Financial Qatar LLC 28/05/2008 Regulated Activities Allied Advisors LLC 18/06/2008 Professional Services (Consulting) Coutts & Co 19/06/2008 Regulated Activities Marsh Qatar LLC 30/06/2008 Regulated Activities and Professional Services Aon Qatar LLC 22/07/2008 Regulated Activities and Professional Services UBS AG 23/07/2008 Regulated Activities State Street Middle East North Africa LLC 29/07/2008 Regulated Activities Latham & Watkins LLP 18/08/2008 Professional Services (Legal) Qatar First Investment Bank LLC 04/09/2008 Regulated Activities Al Tamimi & Company International Ltd. 10/09/2008 Professional Services (Legal) MARSH BROKERS LIMITED 14/09/2008 Regulated Activities McKinsey & Company, Inc. Qatar 18/09/2008 Professional Services (Management Consulting) Citigate Dewe Rogerson Limited 23/09/2008 Professional Services (PR Consulting) QNB Capital LLC 28/09/2008 Regulated Activities Qatar Insurance Services LLC 24/11/2008 Professional Services (Consulting) First Gulf Bank - QFC Branch 24/11/2008 Regulated Activities Nexus Financial Services WLL 30/11/2008 Regulated Activities Mitsui Sumitomo Insurance Company (Europe) Ltd 17/12/2008 Regulated Activities and Professional Services Dewey & LeBoeuf LLP 13/01/2009 Professional Services (Legal) The Bank of Tokyo-Mitsubishi UFJ, Ltd. 15/01/2009 Regulated Activities Moore Stephens Services (Qatar) LLC 05/04/2009 Professional Services (Accounting) Bloomberg L.P. – QFC Branch 30/04/2009 Professional Services (Multimedia) Nomura International plc, Qatar Financial Centre Branch 28/05/2009 Regulated Activities QInvest Partners LLC 14/06/2009 Operation and administration of trusts and similar arrangements White & Case LLP 09/07/2009 Professional Services (Legal) International Financial Services (Qatar) LLC 28/07/2009 Regulated Activities Allianz Takaful – QFC Branch 09/08/2009 Regulated Activities Pacific Star Doha LLC 27/08/2009 Regulated Activities T’azur Company b.s.c.(c) – QFC Branch 17/09/2009 Regulated Activities Guardian Wealth Management Qatar LLC 20/10/2009 Regulated Activities SEIB Insurance and Reinsurance Company LLC 21/10/2009 Regulated Activities Chedid and Associates Qatar LLC 21/10/2009 Regulated Activities Rothschild (Qatar) LLC 18/11/2009 Regulated Activities Q-Re LLC 06/12/2009 Regulated Activities NYSE Qatar LLC 04/02/2010 Professional Services (Consulting) Booz & Company (Qatar) LLC 07/02/2010 Professional Services (Consulting) Allen & Overy LLP - QFC Branch 09/02/2010 Professional Services (Legal) Matrix ME Alignment Fund Management LLC 18/10/2010 Regulated Activities Thomson Reuters (Markets) Middle East Limited, 02/11/2010 Professional Services (Multimedia) Qatar Financial Centre Branch Qatar Finance and Business Academy LLC 04/11/2010 Business and Professional Education Michael Page International (UAE) Limited, QFC Branch 28/11/2010 Professional Services (Recruitment Consultancy Services) QInvest Capital LP 23/12/2010 Operation and administration of trusts and similar arrangements Qatar Holding Gold and Resources LLC 05/01/2011 The business of a Holding Company JPMorgan Chase Bank, N.A. – Qatar Financial 05/01/2011 Regulated Activities Centre Branch Concordia Capital LLC 13/01/2011 Regulated Activities SThree Qatar LLC 24/01/2011 Professional Services (Recruitment Consultancy Services) Takaful International Company – QFC Branch 15/02/2011 Regulated Activities Clifford Chance Middle East LLP 21/02/2011 Professional Services (Legal) Qatar Asset Management Holding LLC 28/02/2011 The business of a Holding Company McGrigors LLP – QFC Branch 07/03/2011 Professional Services (Legal) Matrix GCC Real Estate Fund LLC 23/03/2011 Operation and administration of trusts and similar arrangements Lalive in Qatar LLC 28/03/2011 Professional Services (Legal) Baker & McKenzie LLP 17/04/2011 Professional Services (Legal) Regester Larkin Limited 19/05/2011 Professional Services (Consulting)
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