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Gulf Investment Fund looks beyond oil for long-term outperformance

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One area that is experiencing above-average growth over the past 12 months has been the GCC, or Gulf Cooperation Council.  This is the regional, intergovernmental, political, and economic union comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, which is predicted to grow around 3.9% to 4.2% this year.

The International Monetary Fund predicts global growth to be up to 3.2% in 2024 and the hydrocarbons-rich GCC is seeing above median growth on the back of a higher oil price – which could still have some way to go, given the issues in the immediate neighbourhood with Iran and Israel, and ongoing conflict in Russia.

But the GCC isn’t just about oil and gas.  The kingdoms in the region have over the last two decades successfully diversified away from hydrocarbons, developing growing financial services, tourism and manufacturing industries. Moreover, unlike Western governments, GCC governments are not shy in investing their own money into large scale infrastructure projects, that help develop their economy and improve the lives of their own citizens.

Geopolitical and economic risks

However, the GCC is a tough neighbourhood.  Constant tensions simmer between neighbouring states such as Iran, Syria, Lebanon and Israel that are always trying to drag the bloc into a hot war, and with non-state actors such as the Yemeni Houthis, Hamas and Hezbollah stoking up international tensions. Moreover, although the GCC states have made significant strides to diversify their economies, the bulk of the revenues are still from oil and gas, and as such vulnerable to a sustained global slowdown.

One way to gain exposure to the growing economies of the GCC is through an investment trust such as the Gulf Investment Fund [LON:GIF].  This seeks long-term capital growth and dividend income from investing in companies listed, and soon to be listed, on the stock exchanges of the countries that make up the GCC region. The fund is managed by Epicure Managers Qatar and was launched in July 2007.

Originally a Qatar-focussed fund, part of the Qatar Insurance Company founded in 1964, the managers expanded their mandate to include all of the GCC in 2017. The fund is part of the Association of Investment Companies’ (AIC) Global Emerging Markets Sector, which is a basket of Emerging Markets funds which, when evaluating, is a little like comparing apples and pears.  The emerging markets are a disparate bunch, including Africa, Latin America, Eastern Europe and the Middle East, all developing at different rates, and with different factors that influence their growth and development. The fund is benchmarked against the S&P GCC Index, denominated in US dollar and domiciled in the Isle of Man.

Nevertheless, in this group of eleven funds, over five-years, the Gulf Investment Fund returned (on a share price total return basis) +122%, compared to a sector average return of +12.4%. Over 10 years, the fund also was comfortably above its sector peers in top spot, with a return of +141.3% against a sector average of +73%. However, over one year, the Epicure fund could only muster a +0.89% return, against a sector average of +11%.

Fund manager Bijoy Joy has been with Epicure for ten years, and been lead manager since 2023, previously working at an Indian investment research house and follows a blend of top-down and bottom-up investment approach to build portfolios with long-term return potential.

It’s not just about oil

Joy has recently become very bullish on the regional financial services sector, underpinned by a rise in regional personal and corporate lending, and the relative value of financial services firms in the GCC; although he is selective in which banks he picks, seeing Qatari banks less attractive due to their regional disparity in terms of holding a lower comparative levels of low cost deposits. Nevertheless, over the last year the fund has started to reverse its underweight position in financial services.

He is also bullish on industrials, being overweight the index in the sector and sees opportunities for growth in tourism and industrial production, with tourism not just being about foreign visitors jetting into Dubai for a few days of sun, swimming pools and gastronomic experiences; but also growing internal GCC demand for inter-regional and national travel.


The fund has the healthiest five-year dividend growth in sector at 21.98% per annum, compared to a sector average of 5.2% with a dividend yield of 3.5%. The fund charges 1.89% (excluding performance fee) and trades at a discount to premium of -6.2%. The fund has no gearing currently.

Top five holdings as at 31st March 2024

Investment Weighting Sector Country
Saudi National Bank 7.8% Financial Services Saudi Arabia
Dubai Islamic Bank 5.5% Financial Services UAE
Integrated Holding Co. 5.0% Industrial Services Kuwait
Saudi British Bank 5.0% Financial Services Saudi Arabia
Qatar Navigation 4.9% Financial Services Qatar

Source: Qatar Insurance Company

The Gulf Investment Fund positions investors at the heart of the GCC’s dynamic economic story. With a focus on undervalued sectors poised for significant growth, experienced management, and a healthy dividend track record, the fund offers a compelling opportunity to capitalize on the region’s bright future. While geopolitical considerations remain, the GCC’s commitment to diversification and its strong fundamentals paint a promising picture for long-term investors seeking exposure to this exciting market.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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