MENA FUND

Issue 3, January 2012

REVIEW
Beyond the headlines

Why a growing number of investors are giving Palestine a second look

Risky business

Bjorn Englund on the merits of pre-frontier markets such as Iraq

Built for the times

Durability may be the most important characteristic

Jamal R. Saab, managing director and head of MENA, Natixis Global Asset Management, on the firms unique durable portfolio approach
Stephen Oxley gives his verdict on the future of hedge funds in the MENA region

features

Natural mega themes

WITH nearly 80 million net new people joining the planet each year, our world is grappling with rising demand for food and water and a strain on vital natural resources. The investment community is taking sharp notice of these challenges and the profit opportunities they offer. Global Fund Exchange chairman Anric Blatt discusses his foray into crucial agriculture, water and natural resources investments and why he believes the time is right for MENA based investors to allocate capital to these mega themes. After an extensive career in hedge funds, what drove you to dedicate your life and business to this niche sector? Easy access to capital in the 90s and 00s ushered in thousands of investment funds that delivered very little value over and above illiquid and opaque leveraged beta with too much money for nothing. I realized that in order to prosper and flourish over the long term, an investment business must (A) add significant value at every step and (B) invest in themes that satisfy an actual need or help meet an imminent scarcity. All macro research roads led us to energy and its intrinsic vectors, agriculture and water; important themes which are well understood by GCC investors. On a personal note, having grown up in a harsh, unforgiving desert environment, I learned from a young age that sustainable practices and resource conservation are essential to survival. My business interests are focused entirely on providing profitable and responsible investment solutions in energy, water and agriculture and accelerating capital flows to the sectors that our planet needs the most. Given the recent upheaval surrounding food security in the MENA region, lets begin with agriculture. Where do you see catalysts for investment? Limited resources, increasing demand and rising food prices provide compelling reasons to invest in global agriculture. We are seeing significant opportunities in commodities, farming and seed technology and agribusiness, to name a few sub-sectors within our agriculture portfolios. We combine our medium term equity exposures with short term commodity trading to offset volatility and downside risk. To say commodities have been volatile over the past few years would be an understatement. What do you think has sparked these ups and downs, and what do you see ahead for 2012? Youre right; we have experienced record high food prices and market volatility in commodities. Weather anomalies and pattern shifts have devastated crops, leading to unprecedented jumps in wheat, soybeans, corn, coffee, sugar and other basic commodities. Over the next decade, the FAO expects grain prices to remain 15-40 percent above 1997-2006 levels meaning high prices are not going anywhere, but weather instability, low stock levels and kneejerk political reactions will continue to provide our traders with an attractive opportunity matrix to make money. How is population growth contributing to what appears to be a looming global food crisis? We need to ask ourselves how we expect to feed the nine plus billion people that will be living on Earth by 2050. Startling reports from the FAO estimate global agricultural production must increase 70 percent to meet new demand. Nearly all new demand is coming from the developing world, where agricultural output is set to double. Despite years of advances, gains in agriculture yield per acre have slowed to less than one percent a year, so we do have some serious work to do to meet future needs. The good news is that agri-science and technology is attracting significant new investment and government focus. As a result, we are seeing a lot of opportunity to profit here, but it goes hand in hand with water. It has been reported that by 2025, the world will need 25 percent more water than is currently available. What water issues do we as investors need to be aware of? Humans are extracting freshwater at nearly 100 times the natural replacement rate. Water scarcity is already an economic constraint in major growth markets such as China, India, Indonesia, Australia and the Western U.S. By 2025, per capita water availability in the Gulf will likely decrease by 50 percent. Rising population and per capita consumption will soon become a major factor in both energy and water markets in the GCC, for the energy industry is

Anric Blatt, chairman, Global Fund Exchange

highly water dependent. The time to act on these catalysts is right now, while global equity prices are reasonable and large long-only commodity players are rebuilding their books. Finally, what are your plans here in the MENA region for 2012? We have a five year track record of allocating capital to these vital asset classes and are now a known entity to the larger institutional players here. Currently, we are in negotiations to develop a vital assets fund management hub in the region, for I strongly believe that forward thinking countries like Abu Dhabi and Qatar have the ability to really make a difference, and profitably so, in this area. This year, we will be launching our multimanager managed account platform to provide allocators complete transparency and security right through to underlying position. Our plan is to combine this with our advanced risk monitoring platform that we launched in 2005, allowing each client to set their own risk budgets and reporting. Additionally, direct access to our segregated clean energy, water, agriculture, energy and natural resource portfolios is now available. Treat the Earth well. It was not given to you by your parents. It was loaned to you by your children For more information on Global Fund Exchanges agriculture, water and energy sectors, visit: http://www.qfx.qa/

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