Mena volatility makes for attractive opportunities

Baring Asset Management’s chief investment officer says that the region remains highly attractive despite political tensions, and China’s revival will boost emerging equity markets.

Marino Valensise says investing in the Mena region remains an attractive proposition. Chris Ratcliffe / Bloomberg News

Marino Valensise is chief investment officer of Baring Asset Management, the global investment institution. Based at BAM's London HQ, he has found himself a frequent visitor to Dubai, where the firm has based its growing Middle East business in the Dubai International Financial Centre.

Where does Baring Asset Management stand on the great "bonds versus equities" debate?

We have recently become more positive on risk assets such as equities following policy announcements by central banks across the globe. While investors have sought safety in the growth on offer in the US through 2012, we believe that this is now firmly embedded in the majority of analysts' expectations with equity valuations at the higher end of the range. In the multi-asset portfolios we run, we have been seeking opportunities elsewhere. From where we stand, the UK market, given its make-up has significant exposure to global growth akin to the US but at more attractive valuations. We are also becoming more positive on emerging equities as we believe news that the Chinese economy has stopped slowing could boost sentiment towards not only China, but other emerging equity markets too. Looking at fixed income, we see only a small chance of "safe haven" government bonds appreciating in 2013. We are, however, generally positive on corporate bonds and here we prefer high yield over investment grade. In our view, high yield continues to be well supported by low default rates and healthy corporate balance sheets.

How has Barings fared in the post-crisis world?

It has been amply demonstrated in recent years that size, whether large or small, has not of itself delivered extra value to clients, shareholders or staff. However, our strategic focus on emerging and inefficient markets, specialist fixed income and asset allocation, strong distribution partnerships, outstanding client service and robust risk controls have allowed us to capture market share from our competitors globally.

Our success has been recognised independently, with a highly esteemed Queen's Awards for Enterprise 2010 in the international trade category. This award, the UK's most prestigious award for business performance - lasts for five years - and recognises UK companies that have demonstrated substantial growth in overseas earnings, commercial success and outstanding achievement in international trade.

What is your view of the Middle East and North Africa (Mena) region as an investment destination since the Arab Spring?

Despite recent political tension across Mena, we believe the investment case for the region remains highly attractive. Economically, we are encouraged that Mena countries continue to deliver strong and sustainable growth. The region has a highly favourable demographic profile - around one-third of people in the region are under the age of 15 - and we believe this should underpin long-term demand for housing, health care and consumer goods.

Elsewhere, resource-rich economies continue to benefit from an elevated oil price environment and this means that countries such as Qatar and Saudi Arabia are able to invest heavily in infrastructure assets, which we believe is a requisite to supporting the long-term trend in economic and population growth. Although we expect political tensions to remain elevated in certain countries over the short term, we continue to view any periods of volatility as an opportunity to acquire companies with good long-term growth prospects at reasonable valuations.

What funds interest Arab clients?

Our clients are very interested in emerging market equities, including the Mena region and also specialist fixed-income products such as the Baring High Yield Bond Fund.

How have Mena-centred funds performed?

The developing nature of Mena equity markets means that analyst coverage isn't always as comprehensive as elsewhere and we believe this provides significant opportunities to invest in companies which are undervalued and unrecognised by the market.

Even throughout the recent period of political uncertainty, we have identified some attractive investment opportunities and the Baring Mena Fund has returned 21 per cent in US dollar terms over the first 11 months of 2012.

This compares to a return of 7.4 per cent from the MSCI Arabian Markets ex Saudi Arabia Index and 13.1 per cent from the wider MSCI Emerging Markets Index.

What distinguishes Barings from other asset managers?

Barings is an institution with a rich heritage and we were proud to recently celebrate our 250th anniversary - a milestone reached by few institutions in any sphere of activity.

International activity, emerging and specialist market expertise has been at the centre of our business since the earliest days and these areas remain integral today.

As we head into 2013, our focus remains on fulfilling our clients' objectives by providing top-quality investment products and superior service delivered by dedicated teams of experienced and talented professionals.

We do not try to be all things to all people. We concentrate on areas where we have a track record of performance.