Asset Management to support productive capacities
Our Asset Management Department (“AMD”) mission is to structure, step up, launch and manage funds via Special Purpose Vehicles categorized according to the portfolios respective domains, mainly Income and Capital Market and SME & Private Equity. ICD Asset Management seeks to create a multiplier effect on ICD’s own directly deployed resources, and aims at connecting sovereign wealth funds, financial institutions, pension funds, insurance companies, endowments, foundations, family offices and high-net worth individuals with investment opportunities across various themes in emerging markets.
ICD AMD provides investors with fund management solutions, spanning the full spectrum of asset classes in diversified industries within a wide-geographic footprint. The prime goal of AMD is to create an “Enabling Environment” for the growth of Islamic Finance and build “Partnerships” with the private sector to enhance resource mobilization. Our asset management activities are composed of two platforms:
(1) Income and Capital Markets Funds Program: and
(2) SME and & Private Equity Program
All the funds under the Platforms are structured and designed keeping in view of the key criteria for any initiative which are:
INCOME AND CAPITAL MARKETS FUNDS PLATFORM:
ICD manages various income funds for investors across the full risk-reward spectrum including the Unit Investment Fund (UIF), the Trade Premium Fund (TPF), the Corporate Premium Fund (CPF) and the Global Sustainable Fund (GSF).
UNIT INVESTMENT FUND (UIF):
The Unit Investment Fund offers sharia-compliant financing products across the corporate and trade finance spectrum. In 2017, to overcome various challenges, we had an underlying trade and corporate sub-portfolio that will enable us to enhance the performance of our funds and surpass benchmarks in the near-term. In 2017, UIF’s performance was in line with 2016 performance as the fund distributed an interim dividend of 1%. The UIF achieved USD201.2m assets under management during the year. Improvements in the return factor in the growth of the underlying sub-funds, CPF and TPF, described below.
TRADE PREMIUM FUND (TPF)
The TPF was launched in January 2016 and was positioned to invest predominantly in premium yield structured trade finance (STF) with an exposure to lucrative sovereign and bank-guaranteed trade finance.
Although the fund was still considered in its investing period, it has successfully closed the year with over 85% utilization of proceeds and generated a rate of a return of 3.77%.
CORPORATE PREMIUM FUND (CPF)
The CPF was launched in January 2016 with an initial capital base of USD74m, and aims to invest in viable corporate finance transactions in line with the principles of sharia in high growth frontier and emerging markets.
Overall, the fund made seven new investments in four countries and five sectors in 2017. This head start, along with a solid pipeline of projects, empowers the fund to make a significant impact in corporate investments in the coming years.
In 2017, it generated a return of 5.03% in line with its target return.
GLOBAL SUSTAINABLE FUND (GSF)
In 2017, we have conceptualized and launched our new Islamic sharia compliant equities fund, the GSF. The fund follows the environmental, social and governance model in selecting its equity investments. GSF ended the year 2017 with assets under management of USD36m and a return significantly exceeding its year-end target of 5% (annualized). Since its launch in July 2017, the GSF has yielded an exceptional annualized return of 11.5% –exceeding its benchmark.
SMALL AND MEDIUM ENTERPRISES & PRIVATE EQUITY (SME & PE) PLATFORM:
The SME & Private Equity Platform at Asset Management Department of ICD is composed of close-end funds which extend for a period of 8 to 12 years, offering long-term capital appreciation through equity exits, and are catered to the riskier investor. These funds are thematic and geographic in nature and hence are externally managed based on the manager’s local and sectorial expertise. The Platform strategically position itself as a reference institution among the SME’s investors by developing a cohesive and active partnership structure with development finance institutions, government backed funds, and foundations. An active role is to be projected into the fund raising process and investor relations for ICD sponsored SME focused vehicles.
ICD’s Approach to SME & Private Equity Funds
ICD acts as a sponsor or an anchor investor along with other key investors to develop private equity funds as well as other special purpose vehicles. ICD aims to be among the cornerstone investors and play the role of a catalyst for the success of the funds. ICD’s participation includes equity, quasi equity, mezzanine and debt. ICD to play a role in the governance of the fund through representation in the Investment Committee and Advisory Committee.
ICD provides fund managers with the necessary technical assistance to effectively establish and run the private equity fund. The service agreements offered by ICD includes supporting and strengthening the capacity of the fund manager; structuring the Sharia Committee of the fund and advising on Sharia principles' matters; supporting the fundraising efforts of the fund.
SNAPSHOT OF THE EXISTING SME & PRIVATE EQUITY FUNDS
SAUDI SME FUND:
The Saudi SME Fund is a closed ended fund providing mezzanine financings to SMEs for growth and/or expansion in Saudi Arabia. The Fund plays a key role in the development and growth of the SME sector in Saudi Arabia and addresses various challenges faced by the Saudi SMEs. It is a Sharia compliant partnership program for SMEs in operation for at least two years in value added sectors, to help to realize their true potential.
The Fund is managed by Malaz Capital with their expert team focused both on debt and equity financing. The Fund size is SAR 400m, with 10 +1+1 year life, and ICD acted as an anchor investor in the Fund, in partnership with other reputable financial institutes in Saudi Arabia.
The fund was launched in partnership with United Gulf Financial Services (UGFS), and was the first Islamic private equity fund in Tunisia targeting SMEs. The fund aims to help Tunisian SMEs to improve their competitiveness, facilitate access to local and international markets, ensure company growth, and foster the acquisition of human capital.
With TND 18m in commitment from reputable institutions, the fund is in process of deploying capital in the local SMEs, thereby helping them to improve their competitiveness and also to strengthen their balance sheet. The Fund life is 10 +1+1 years, and ICD acted as an anchor investor in the Fund, in partnership with other reputable financial institutions in Tunisia.
ISLAMIC BANKING GROWTH FUND
Closed ended private equity fund with a target size of US$300m. The fund life is 10 +1+1 years and focused on the Islamic Banking sector globally, primarily established and operational banks, new financial institutions, or conversions to Islamic Banking. The Fund is currently operational with US$100mn in commitments, having achieved initial close in 2017. The Fund is expected to raise additional funds from leading governmental, semi-governmental, multilateral and private institutional investors with commercial and strategic interests in the Islamic Banking sector.
The Fund offers a unique platform for investment across various countries for the development of the Islamic banking sector with a view to generate attractive risk adjusted financial returns. The Fund’s investment strategy allows it to originate and execute investments directly or through co-investment basis with ICD.
ICD is currently managing the Fund with an in-house team of seasoned investment professionals with support from its Financial Institutions, Asset Management, Advisory, Risk Management, and Legal departments and with support from external experts as and when necessary.