TheBusinessYear: Over & Above
What have been some of the defining events in the evolution of Global since it was established in 1998?
It's been somewhat of a rollercoaster ride for us. When we were established in 1998, when oil was at around $8. We shot up like a rocket during the first 10 years of our inception. We understood that the capital markets in Kuwait lacked certain products and services and we capitalized on that. We entered a boom market phase between 2002 and 2007, which gave us the headwind we needed to grow. We started Global with a capital of $50 million in 1998 and, by mid 2008, we were trading at a $5 billion market cap. We expanded our offices to cover Kuwait, Saudi Arabia, Jordan, Egypt, Oman, and even had investments in Palestine. The financial crisis was the first real challenge for us and, as we witnessed, when the US sneezes, the whole world catches a cold. Asset liability management became a major challenge as well. We were only 1-to-1 leveraged at the time, but in less than 12 months we were leveraged at more than 12-to-1. We chose to be completely transparent with our clients, shareholders, and regulators throughout it all. This approach was unique in a culture that generally conceals problems, but we stuck to our commitment to being honest. I'm proud of what Global has done. With the restructuring agreement we signed in 2012, the company is now well capitalized, totally debt-free, and profitable. Dividends are being distributed and business is growing.
What is your current strategy to leverage Global's position moving forward?
Although Global is extremely liquid, with more than 45% of our balance sheet in cash, we are not too keen on taking risk with our capital. We would like to use our liquidity to strengthen the fee business, and either co-investing in the products that we launch side by side with our clients, or through approaching opportunities for inorganic growth. Our earnings will be completely different from what we had before; it's no longer about how much you make but about the quality of your earnings which provides sustainability and better valuation. After all we have been through, most shareholders are very risk averse and very sensitive to taking chances. The environment in general is still volatile. Therefore, we opt to be risk-averse at this time.
What expertise does Global provide investors looking for a local partner within the GCC and MENA region?
We are focused on our asset management business and on investment banking opportunities. First off, in investment banking, with our regional footprint, we create a strong bridge connecting buyers and sellers across the region. This is where we can really add value. Many investment houses offer similar expertise and experience in financial engineering and technical sides of the business, but our regional footprint, insight and placement power gives us an edge. Since their inclusion in the MSCI Emerging Markets Index, Qatar and the UAE have brought a lot of investor attention to the region and we hope other GCC countries, particularly Kuwait, can also follow suit. That would open windows of opportunity in the asset management business to develop more products for investors that are keen to find local partners who understand the market, not only on the large-cap level but also on the mid-cap and small-cap levels.
What kinds of new asset management products is Global pioneering in the region?
We offer MENA Equities Asset Management products, which include everything on the public market from Islamic, conventional, indexed, or oil-related business. Our funds and portfolios have been outperforming benchmarks and peers for years now, so they have really developed their track record. On the international asset management level, we play more of an advisory role, investing in human capital, software, and systems that enable us to filter international opportunities through international managers, which we then share with our clients. We also offer cash management services, real estate asset management, and private equity. We've launched a lot of private equity funds since our inception in the range of billions of dollars, and we were able to distribute hundreds of millions of dollars back to investors. We are in the process of launching two new products. One is a fund to invest in secondary private equity funds in the region. The other is a healthcare platform, which will be a vehicle for investors to take advantage of what we have to offer in the healthcare domain at the GCC-MENA-Turkey level. We create synergies where we feel there is opportunity. Moving forward, Saudi Arabia and Turkey will be very exciting to watch.
As a leading Kuwait-based investment company, what role do you see Global playing in terms of improving the business environment and contributing to the local society in Kuwait?
Our corporate social responsibility strategy focuses on two major segments; women and young people. Kuwait has always been a pioneer in supporting women and we at Global have a lot of women in senior positions. We have held a lot of seminars on women in investment, training, and promotion of women's empowerment. In complement to the national vision of Kuwait, we also feel strongly about the need to support the emergence of entrepreneurs and small businesses. We feel the frustration of young people in trying to fulfill their dreams. There's a lot we need to think about to support small enterprises. We are hoping that we can work with the Kuwait National Fund for SMEs Development; the $2 billion fund that has been created by the government to support young people.
Considering Kuwait's economy as a whole in the context of the low oil prices that we're seeing, how can the investment sector play a more active role in supporting the diversification of Kuwait's economy?
The Kuwaiti government has been pushing ahead reforms to enhance the business environment in the country and accordingly diversify the economy. The Capital Markets Authority was established under Law No (7) in the year 2010, the new company law was passed in 2012 to replace the previous law of 1960, and laws pertaining to public-private partnerships (PPP), foreign direct investment (FDI), and small and medium-sized enterprises (SME) were also introduced. The largest contributor to non-oil GDP has always been the financial sector. With the enhanced business environment, investment-banking services will be highly required and Kuwaiti investment banks will be major players in the market. On the other hand, with the country having a lot of wealth in liquidity and the experience and track record of Kuwaiti asset managers, Kuwait could become the asset management hub of the region.
Kuwait is well known for its investment outflows, but in terms of attracting investors to Kuwait, what opportunities exist here and how can Kuwait create a more attractive environment for foreign investment?
There are a lot of things we can do, especially with the recent reforms mentioned earlier. The retail market promises a lot of growth potential considering the demographics on the consumer-side, the strong inflow of expats, and the growing entrepreneurial spirit among SMEs in Kuwait contributing to the consumer goods and retail market in the country. There's a lot of potential in the healthcare and educational sectors, as well. These sectors still hold a lot of value for investors in Kuwait. Then of course everything related to oil and gas, petrochemicals, and alternative energy.
What are your expectations for 2016?
Everything we talk about economically for 2016 hinges on what happens geopolitically, unfortunately. The developments with Iran may lead to further uncertainty in the region and markets don't expect a rise in oil prices to hit the $70-$100 dollar range, but will be somewhere between $30-$50 a barrel. I hope GCC governments tackle the challenge that a reduction in oil prices will continue to have on their budget surpluses, and moving towards a budget deficit, which could be a potential for the GCC government and corporate debt market in meeting the fiscal spending and the development plans that the government continues to commit to in the coming few years. Over and above that, we will continue to offer ideas in defensive sectors such as health and education, amongst others.
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