DIVERSIFYING THE PORTFOLIO

Kuwait 2017 | FINANCE | INTERVIEW

TBY talks to Faisal M. Sarkhou, CEO of KAMCO Investment Company, on raising money, the role of debt markets in the region, and expectations for the year.

 Faisal M. Sarkhou
BIOGRAPHY
Faisal M. Sarkhou joined KAMCO’s team in 2000 and was promoted to lead KAMCO in the position of Acting Chief Executive Officer in June 2012 and confirmed by the board as CEO in the first half of 2014, after heading the Financial Services and Investment Division at KAMCO since 2010, and the Corporate Finance Department from 2006-2010. He has extensive experience of up to 17 years in investment banking, asset management, financial products as well as financial services. Sarkhou commenced his career in the late ‘90s with KPMG Corporate Finance in Kuwait. He serves as a board member on several top companies and funds.

What developments have characterized the last year for KAMCO?

A key issue for KAMCO was to maintain operational growth and profitability in a difficult operating environment. It has been a tough year for us, but we are proud to have been able to grow our core activities and maintain our profitability during a tough time. Our asset management activities in terms of portfolios and funds are beating benchmarks and growing in size. Despite losses in the markets and falling values, we have been able to raise new money and expand our products regionally, which has added more diversification to our return portfolio. We have also been cautious on the equity markets and that has helped us weather the volatility. On the investment banking side, we have been quite successful in winning announced mandates, especially on the debt side, which has helped us position KAMCO among the top regional lead managers and book runners in GCC and MENA bonds.

Do you see an increasing role in debt markets and issuances in Kuwait, and how do you see the spread in your advisory activities?

When we look at debt markets, we see that financial institutions are looking at strengthening their capital base. Accordingly, our investment banking team continues to lead in this space on every transaction announced in Kuwait. The time comes with a wealth of expertise and track record, managing to successfully execute over 87 transactions since inception as of March 31, 2016, valued at over USD12.5 billion. We have been active and closed the first investment grade-rated Tier-2 private bond in the last quarter of 2015 for NBK and, during the first quarter of 2016, we acted as one of the joint lead managers (JLMs) for Burgan Bank's KWD100 million, subordinated Tier-2, Basel III compliant bonds. KAMCO was also one of the lead managers in Kuveyt Türk's Tier 2 capital-boosting sukuk worth USD350 million, and we were one of the few JLMs on it.

How do you approach business around the region and how do you plan to diversify out of Kuwait?

In the last decade, we were focused on Kuwait, and since the past post-financial crisis years we have extended our product line and services further within the region, investing more into regional areas, real estate, fixed income, and equities. In addition, we obtained our license to open and operate an office in the DIFC area in Dubai, UAE. We believe that the DIFC's solid growth and stable platform make it the ideal hub for KAMCO to access emerging markets in the Middle East, Africa, and South Asia (MEASA). We are also looking at other areas in the region, currently focusing on the MENA region in particular. However, we will also venture into international markets and real estate, looking actively at real estate opportunities internationally. In addition to that, we are also about to launch an international sharia-compliant product.

What are your expectations for 2017?

It will be a better year than 2016. We had a tough 2015 and a tougher 2016 than expected. Yet, we expect 2017 to be a better year as companies become more efficient and focused on their activities. As the oil sector stabilizes, investor sentiment is likely to bounce back. Moreover, when a country initiates privatization, it allows the private sector to have a larger role in performing business activities in a more efficient and modern way. Privatization in Kuwait will need to have a consensus in regulatory framework on the governmental side. Thus, the parliament and Kuwaiti government will have to build a consensus evolving the plan for privatization and set key objectives while creating a win-win situation for society and business in general. The gridlock between the government and parliament is being addressed successfully, allowing for more efficient privatizations moving forward. The entities to be privatized have to be properly regulated and organized under fair parameters to achieve a win-win situation for all, with companies achieving profits in the long run while improving efficiency and user satisfaction.