KAMCO's strategy aims at maintaining its leadership position in the asset management and investment banking sectors. What trends have you seen dominating your investment performance in recent years?
After 2013, KAMCO emerged from a difficult period following the financial crisis. We undertook significant restructuring and focused on building our core business areas: asset management and investment banking. We returned to profitability in 2013 and started achieving several key objectives and set milestones. The markets also supported us in their upwards tends. The key geographical focus areas for our clients were the MENA region including Kuwait, the GCC, as well as other targeted parts of the region. Several of our clients are increasingly observing Europe, North America, and the Far East, but remain cautious and highly selective. The 1H2014 was also positive, while the second was more volatile due to a loss of investor confidence stemming from the drop in oil prices and increasing geopolitical instability, reasons that continue to affect markets to date. Despite numerous positive indicators, especially in the GCC, we note that capital market activity remains volatile, leading to a downward trend. This has affected the investment sector and KAMCO in our capital markets business. However, we successfully launched a new fixed-income fund in March 2015 focused on MENA region investment grade bonds and sukuks. KAMCO posted $16.87 million in Fee Income in 2014 compared to $17.53 million in 2013. The company reduced its debts by 17% to $79.4 million in 2014 compared to $95.94 million in 2013. Our AUM registered a significant growth of 23% in 2014 to $12.2 billion in 2014, compared to $10.1 billion in 2013. KAMCO's results during 2014 reflected the company's balanced and consistent performance at the operating income level in our main activities. By the end of 2014, we had successfully completed over 82 cumulative investment-banking transactions worth over $12 billion.
Who are your target clients and how are you tailoring your investment products to their needs?
We believe that by creating products that give investors market access at lower costs with proper management and appropriate risk measures, we can benefit from tapping into the significant liquidity that is already there with medium to high-net worth individuals and corporates, as well as sovereign and semi-sovereign investing entities in the region. The product cycle we launched, and are continually developing, primarily focuses on such clients.
To what extent has the new phase of privatization in Kuwait's capital markets supported the country's transition from frontier to emerging market status?
Kuwait has been actively pursuing this strategy through significant upgrades in the regulatory framework and improvements in the laws that allow companies to be established or privatized under a new private-public sector framework. Processes such as these take time and issues related to fine-tuning regulations and making sure people adapt to and abide by the new codes of corporate governance and ethics may delay development. The government is taking the necessary steps to expedite this process. Unfortunately, market conditions are bearish in general, which appear to be affected by the regulations, but in reality they may show some kind of reaction as people adjust, it is more about a lack of investor confidence than anything else. Some of the initiatives taken recently by the CMA were aimed at encouraging investment, building investors trust, increasing the capital and encouraging creativity among investment companies.
In the context of Kuwait's growing economy and with major government development plans in place, what role do you see KAMCO playing in Kuwait's future growth?
We believe that the government plans will produce a strong trickle down effect to the private sector and will further allow businesses to focus on efficiency and the enhanced delivery of products and services. To kick-start an economic revival, the government approved a new five-year development plan for Kuwait, which envisages spending $112.9 billion on development projects in the years of 2015/2016-19/2020. The plan is part of Kuwait's long-term vision of becoming a regional trade and financial hub. It includes projects like the construction of a metro system, a railway network and a large number of mega oil projects, along with a new refinery.