By Noah Chasek-Macfoy
The Misr Al-Mostaqbal Investment Fund, managed by HC Securities and Investments, achieved the highest rate of return so far this year among all 22 Egyptian equity funds currently investing in the Egyptian Stock Exchange (EGX), according to a report by The Egyptian Investment Management Association. Misr Al-Mostaqbal provided a 49.5 per cent rate of return during the period from the start of the year and ending on 1 November, more than five percentage points greater than any other fund.
The Misr Al-Mostaqbal Investment Fund is an uncommon example in the financial industry of a fund inspired by a sense of patriotic and social responsibility. Founded after the 25 January Revolution in May 2011, the mutual fund was intended as an avenue of investment to bolster the recovery of the financial sector according to Omar Radwan head of the assets management department at HC Securities and Investments.
“There are more than 80 funds registered in Egypt, 95 per cent of them were created by commercial banks to serve their customers, independent funds like this are limited to only three or four, and none were started during the period we did.” Six commercial banks in Egypt have collaborated to provide subscription to the Misr Al-Mostaqbal Fund.
There is no minimum subscription, and a single certificate is priced at a mere 10 EGP compared with the more common 1000 EGP price. At the fund’s inception, Hussein Choucri, chairman and managing director of HC Securities and Investment, said that “stemming from its patriotic duty and fulfilling its responsibility for promoting investment growth at this critical juncture, and with a fund of such paramount importance expected to significantly contribute to boosting the economy, we decided to waive the fees of managing the fund in its first year of operation.” Even the fund’s name, which means “Egypt of the future,” reflects its broad aspirations.
“We have stories about housewives and young people investing for the first time, lots of stories,” Radwan said. “In this regard we have had success.”
As much as the fund sought to reinvigorate the battered post-revolution financial sector, it also benefited from its initial unstable condition. The fund’s current success is attributable to its entrance into the market at the trough of the business cycle.
The decision to invest when other funds were overwhelmed by negative returns after weathering the revolution in the market was smart, according to an asset management expert who declined to be named. “Their money was outperforming the market when it was sleeping in the bank,” the source said.
“The fund has taken an aggressive investment strategy, it was created to put fresh money into the market, so while other funds were trying to be conservative, we kept less cash and took on more investment risk,” explained Radwan.
An additional factor contributing to Misr Al-Mostaqbal’s strong performance, the unnamed expert source mentioned, is the fund’s decision to not provide redemption payments to subscribers during the first year, meaning that the entirety of the fund’s capital was reinvested in the market.
Hussein Shoukri told CPI financial, “we relied on our trust in the anticipated quick recovery of the Egyptian stock market. We always strive to serve Egypt’s economy.” Whether it is a cause or a symptom, Misr Al-Mostaqbal’s strong performance is evidence of the EGX’s recovery.
At the beginning of September, the largest portion of assets, over a quarter, was in cash, with the remaining assets mostly distributed between the real estate, financial, telecom and chemical sectors. HC Securities and Investments manages the largest share of the equity funds invested in the EGX, managing six out of the 22 funds.