The head of Emirates NBD Asset Management meets George Mitton to discuss international inflows, collaborating with the private bank and suspending the firmâs real estate fund in 2009.
I visit Emirates NBD Asset Management on the last day of Ramadan, the day before Eid holidays. At 3pm, many businesses in Dubai have closed and when I walk into the office, I worry for a moment that Emirates NBD Asset Management has too.
My fears prove groundless when an employee appears and confirms that yes, the company is open and David Marshall, senior executive officer, will see me soon. I’m led into a square meeting room with armchairs arranged around a low table. We are on the eighth floor of the Gate, the giant square arch at the centre of the Dubai International Financial Centre (DIFC), and through the window we can see the lawns and walkways of its gardens.
When Marshall arrives, he surprises me by asking what shorthand system I use. It transpires Marshall was once a journalist for a local British paper before making the move into finance. In meetings, he still employs shorthand, the rapid writing system used by journalists and secretaries, and says his scribbles are occasionally mistaken for Arabic.
Marshall’s journalistic days ended and he began a near decade-long period at Old Mutual in London and Guernsey. It was through Old Mutual that he encountered Emirates NBD, the state-owned bank of Dubai, which was one of the firm’s clients.
About eight years ago, Marshall was asked to move to Dubai to help establish the bank’s asset management division, joining a few months after the unit was founded. He has been with the company ever since, formerly as head of product and distribution and, since October last year, as senior executive officer and head of the business.
Marshall begins the interview in a self-deprecating manner, telling me he doesn’t expect he’ll say much of interest, but this is too modest, for he is a fluent speaker, with a rapid grasp of the concepts of the asset management business and a dislike of business jargon which hints at his former journalistic life.
Only once does he use the word “synergies”, and he earns my respect by preceding it with the comment, “I hate this word”.
I’m keen to know what Marshall’s plans were when he took over from the outgoing senior executive, Deon Vernooy. What did he hope to achieve?
“My predecessor left a strong platform,” he says. “The investment team was strong, there was nothing to do but keep it steady. My aim was to grow distribution, to attract significant amounts of money from outside the bank.”
This the company has done, thanks to its relationships with insurance providers including Zurich International, MetLife, Royal Skandia and Friends Provident International. Marshall says half the fund assets managed by Emirates NBD Asset Management now come from third parties, though this figure falls to 30% if segregated accounts are included.
Marshall says he wanted the firm’s products on platforms from the likes of Zurich because it means they can compete with funds from global asset managers such
as Invesco and Schroders, as well as those from regional rivals such as Mashreq Capital and the National Bank of Abu Dhabi.
Passing the due diligence tests needed to qualify for the likes of Zurich’s platform was important, he says, because it validated the team’s decision to adhere to high standards when the company began developing its funds business in 2005, a time when the funds industry in the UAE was largely unregulated, some would say lawless.
“If you were setting up a fund, you could run it yourself, price it yourself and it could sit on your balance sheets,” he says. “We said no, let’s set up funds with their own boards and have a third-party custodian and a separate pricing agent. It meant that when institutions like Zurich kicked the tyres, nothing looked any different from the big international players.”
The products have also benefited from a new wealth management platform offered by Emirates NBD that has driven more inflows from the bank’s private bank customers.
Marshall credits Pierre Pissaloux, general manager, wealth management, with the internal changes, which have resulted in mandates the asset management unit would not previously have won. He says there is now “no competition and a lot of collaboration” between the business units.
Does this mean there was friction between different units of the business in the past, I ask? Marshall says friction is not the right word.
“Private banks tend to want to offer open architecture. We say, of course, but we want to be included in that, and we are now.”
By all accounts, it seems Marshall took over leadership at a fortuitous time. Since October, assets under management have risen to 6.9 billion dirhams ($1.9 billion), an increase of 40%, and he expects further growth in the coming months.
Marshall does not claim the sole credit for the gain. Emirates NBD Asset Management has benefited from a tremendous rally in regional stock markets that has seen the UAE market rise 70% in a year. Investors have rediscovered an appetite for risk, putting money into high-margin equity funds, such as the Emirates Mena High Income fund, which has trebled its assets since January, albeit from a low base.
Meanwhile, the company’s owner, the bank Emirates NBD, beat analyst expectations with its second-quarter profits and Marshall says the asset management unit contributed to the gain with a significant rise in profitability.
These gains have helped the firm recover from the financial crisis and the Dubai crash. The last few years have not been easy for the firm. Marshall says the biggest difficulty it faced was having to suspend dealing in its Emirates Real Estate Fund in early 2009 because it didn’t have enough cash to honour redemptions.
“When the downturn happened, people used the real estate fund like an ATM,” he says. “Unfortunately, as a lot of property funds found, the levels of withdrawals were way beyond normal expectations.”
Emirates NBD Asset Management suspended the fund so as to avoid having to sell property assets at distressed prices or borrow to meet its redemptions. Instead, it continued to manage the properties while attempting to reassure existing investors and attract new ones. Marshall says it has taken longer than expected, but the firm has completed about a $100 million turnaround in the fund’s cash position in the past 12 months.
“Everyone had their issues in the crisis and that for us was our most difficult issue.”
One of the reasons the UAE stock markets have performed so well this year is the decision by MSCI to upgrade the UAE and Qatar to emerging markets. Marshall says trading volumes have stayed high even during the summer months, when Gulf markets are traditionally quiet.
Emerging market fund managers will build up their positions gradually over the coming months so that they are prepared for the formal upgrade in 2014, he says, and this will provide a helpful underpinning to the economy. The changes may also help drive a change in attitude among outside investors.
“From the global investment community, there is still a caution about allocating capital to these markets,” he says.
“The UAE’s inclusion in emerging market status will help that. What will happen is companies such as Emaar, which are trading at prices-to-book significantly below the emerging market average, will be on the radar screen and start being picked up.”
Yet, while he welcomes the inflows from international investors, Marshall is scornful of those fund managers who have waited until the MSCI decision before buying stocks in the UAE. He says he has little time for fund managers who won’t allocate to a market because it is off-benchmark. Usually, this means the fund managers do not want to take the personal risk, even though the investment case may be solid.
“The frustrating thing for me is it shouldn’t be that way. People should have the courage that these are cheap valuations in a strong economy and commit.”
I thank Marshall for his time and stuff my notepad away quickly, conscious that unlike most interviewees, he is capable of reading my scribbles – and it doesn’t do to share a scoop with another journalist.
©2013 funds global mena