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Tourism Assistance Fund aiming for 25% annual returns: Investment manager

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Egypt’s Tourism Assistance Fund is looking for annual returns of 25% on investments, or $250m in the first phase of underwriting, according to Amr Askar, investment manager at Cairo Financial Holding.

The first phase will take place directly after the Egyptian Financial Supervisory Authority (EFSA) adopts the prospectus.

Askar added in a statement to Al-Borsa newspaper that a prospectus will be presented to EFSA very soon in order to obtain final approval and initiate the underwriting process. The fund aims to gather contributions of $250m, including contributions from the Ministry of Tourism worth $25m. Contributions are also due from the companies managing the fund worth $5m, all expected to be covered within 3 months.

Askar added that most of the fund’s investments will focus on the hotel sector, as it acquires the largest proportion of tourism investments in Egypt, regardless of conditions. Hotels are able to achieve profits as long as occupancy rates dip no lower than 20%.

He explained that the fund depends on elite tourism investment experts from around the world. The fund has its own committee dedicated to studying promising tourism initiatives and making final investment decisions. The fund has a contract with HBS, the largest tourism investor in the world, in addition to contracts with a large number of individual investors.

Kareem Helal, economic advisor to the Federation of Chambers of Tourism, expects a successful underwriting for the fund and anticipates that the targeted amount will be collected easily. Several Arab institutions have expressed their desire to contribute alongside government institutions and insurance companies, although interest from bank subsidiaries in contributing has thus far failed to materialise.

Ashraf Salman, chairman of the board of directors of Cairo Financial Holding, emphasised that Egypt boasts the second highest return rate on investments worldwide at 29%, following only Brazil. He explained that the goal of the Tourism Assistance Fund is profit, not simply support, and that marketing for the fund will begin within two months, followed by the underwriting phase. Work will begin immediately after the first phase of underwriting is completed at the beginning of next October.

He added that the fund will not leave out contributions to tourism in Sinai because of the law that determines foreign ownership. The fund, however, may be divided into two funds, each bearing $500m in capital. One fund will be designated to investment in projects in Sinai, and the other will be available for investment in all other companies.

Nagy Eryan, Deputy Chairman of the Chamber of Hotels in the Federation of Commercial Chambers, said that the fund targets small- and medium-sized hotels. He mentioned the fund’s investment policies, which are managed by Al-Ahly for Development and Investment and Cairo Financial Holding Investment Banking. Eryan also added that the amount invested by the fund in one company’s shares will not exceed 5% of the total volume of capital for the fund’s targeted investment portfolio.

The fund can invest in various tourism sectors, with between 2% and 15% of the total volume of capital for the fund’s targeted investment portfolio allocated to new companies.

Salman explained that the fund’s contributions may reach 25% of the capital of any targeted company. If this rate increases to 50% of the capital, the company is entitled to purchase and restore the share that it acquired to the fund within a period of two years.

Translated from Al Borsa newspaper.


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