KEEN EYE

Kuwait 2016 | FINANCE | VIP INTERVIEW

TBY talks to Raed Jawad Bukhamseen, Chairman of the Arab Investment Company (AIC), on the company's investment strategy and the development of the sector.

What were AIC's main objectives upon its establishment in Kuwait in 2006, and how has the company's investment strategy evolved over the years?

AIC was initially intended as a traditional investment services company, catering for unconnected parties. This purpose was further rethought by AIC's President and other members of the Bukhamseen Group Holding; therefore, entrusting the company with the additional principal objective of becoming the investment arm of the Bukhamseen Holding Group. To that end, the Group's investment activities, then spread across its holdings, became centralized under AIC. Furthermore, members of the family became AIC's shareholders, as the best way for preserving the Group's interest. Clearly, our investment strategy changes according to market developments, but is always based on high-efficiency plans and the safeguard of invested principal. We generally avoid speculation, and rather focus on robust assets with strong fundamentals in specific promising sectors. To date, AIC is operating as a knowledge-based, growth-oriented investment company with the main task of securing the integrity of invested assets and achieving profitability of investments. Currently, it is a boutique investment firm, with sizeable assets under management. Its clients' base encompasses a large number of companies representing several sectors and high net worth individuals. Earning clients' trust was, and still is, AIC's first priority.

What is your criteria when assessing lucrative investments for your clients and shareholders?

In general, we consider liquidity as an important criterion. Whether it is a portfolio investment, or a direct investment, we are attracted to higher-liquidity investments, as they provide readier access to the invested capital, allowing, for example, earlier reinvestment in other good opportunities. But, although liquidity is important, profitability is paramount. A main element of overall profitability is growth. We favor shares whose total value grows at above-average rates. From the risk management perspective, our focus is on reducing risk systematically at each stage of the investment process. We are also particularly wary of investment risk in volatile markets. Our risk-adjustment model ensures a lower volatility rate for our portfolios compared to the market.

What type of clientele does AIC normally work with, and what type of investor would benefit from your expertise?

Primarily, AIC clients are our family members; investing with us either in their personal capacity or on behalf of the companies they are heading within the Group. We also service a broad base of corporate entities and high-net-worth individuals. AIC is a boutique investment services company, whose main attributes are to be knowledge based and growth oriented. Its clients are market knowledgeable investors who go by merit-based decisions.

How have you seen Kuwait's financial sector develop over the years, and where is there more room for improvement?

The financial sector, through enabling capital, is a key backer of the development process. The fact remains, though, that some of the wounds left by the crisis have not yet completely healed. Yet, the potential for improvement is quite strong in Kuwait and neighboring countries. In particular, the Kuwaiti financial system is sizeable and well developed. Besides commercial and specialized banks at the core of the system, it includes financial companies and investment funds. Kuwaiti banks in particular enjoy a high liquidity level, which is a main determinant of growth. Latest market results, this year, revealed strong growth in banking and financial services, with banks being the main driver of growth in the sector.

What role do you envisage AIC playing in Kuwait's economic future?

Since its establishment, it has been imperative for AIC to maintain a strong presence by building up confidence so as to be able to do more for the economy in Kuwait. Looking forward, our role in Kuwait's economic future will stem from our typical mission as an investment company. Our services encompass advising and assisting companies and individuals in market transactions and corporate development. Worth noting is that our corporate finance services always represent a substantial part of our core activities. Our services in this regard encompass mergers and acquisitions, divestures, business valuations and feasibility studies, due diligence, investment review and fairness opinion, capital raising, financial restructuring, and so on, therefore resulting in stronger companies in the State of Kuwait. Added to this is AIC's participation in local and cross-border markets, both at its own corporate level, and on behalf of its clients. We shall continue strengthening our position in local and international markets in what best serves the Kuwaiti economy. It is through these undertakings that AIC plans a wider participation in Kuwait's economic future.

What opportunities do you see for growth in the GCC region?

There are some countries that we seek to invest in and believe are poised for a great future. On the other hand, we seek to divest our positions in other countries where opportunities for gain have eroded. Between both extremes, there are countries where we decided to hold our investment as we foresee an impending market rebound. There are positives to working in GCC countries. In general, our preferences change depending on the sector and the country. In the UAE, we prefer working as a local investor in sectors such as insurance, hospitality, and real estate. In other places, we prefer to be invested in diversified and well-managed companies. Saudi Arabia is a good country to do business in, because of the size of the population, and the presence of economies of scale. We also favor Oman and are studying investment opportunities there. Expanding outside of the GCC, we are looking at Egypt and Turkey. As for Iraq, it is a big market, but still has many unsolved issues.

What are AIC's priorities over the next three to five years? Will you be focused on expanding or consolidating your investments, and where do you see the most potential for profit?

Our first years were focused on creating a sustainable model. This target has been largely fulfilled, and AIC is currently standing on quite solid bases. Efficiency of operation has been broadly achieved. Currently, our priorities are consolidating the investments we are in, along with building up liquidity for expansion by focusing on operational profit. Furthermore, a main item of focus in our future plan is expanding in new markets in stable regions. We have identified our abilities and are investing accordingly. As already mentioned, we are also increasing our client base. We see the highest potential for profit in keeping up with the implementation of our expansion strategy.

What are your expectations for 2016?

We anticipate fewer challenges than in the past few years. We also tend to believe that it will be a very busy year. We will be engaged in building up liquidity, and bringing growth into effective action, namely expanding our presence by opening new markets at the regional level, and increasing our scope of activities, with particular emphasis on generating innovative collective investment schemes. On the macro level, following the legislative approval earlier in 2015 of the broad investment plan for the coming five years (2015-20), as well as the FY15/16 capital spending budget rising notably, it is expected that a solid pace of growth will be driven and supported by public spending. This will pave the way for companies such as AIC to profitably apply their capabilities.