Taking advantage of new regulations set by the Capital Market Authority (CMA), Pharos Holding launched Tuesday its equity fund, Pharos Fund I.
It’s the first fund of its kind, Pharos said, in the wake of the CMA’s decision late last summer to allow financial services firms to create funds like this one. Before then, only banks and insurance companies had the right.
The fund will start at LE 25 million and will begin its subscription period on July 6.
The idea for the fund came to be after the CMA’s ruling last year.
The process for getting approval for the fund, said Mahitab Orabi, a director at Pharos, “took a bit longer than other funds, which is understandable given that it was the first fund to be issued by a company.
The fund is predicated on the idea that there is good value in the Egyptian and MENA markets. Eighty percent of the fund will be invested in Egypt and up to 20 percent will be invested elsewhere around the region.
“Pharos continues to believe that although markets have rallied in recent months, there still remains more value in Egypt compared to other emerging markets, said Shamel Aboul Fadl, Pharos Asset Management managing director.
“Although the recovery in equity markets has been as aggressive as the fall, a consolidation in the markets provides for a good entry level given our positive view on the global markets in general and Egypt in particular, he continued.
Up to 95 percent of the funds investments will be in equities.
Pharos has partnered with the Arab African International Bank, which will administer the fund, while Pharos executives will manage it.
By law, Pharos is required to offer a two-month subscription period, but executives have said that the fund will launch two weeks into that window, at least in part in order to take advantage of what it says are favorable investment conditions.
Shares in the fund will be sold in LE 100 certificates, and investors can subscribe and redeem their certificates on a daily basis.
In choosing its investment, fund administrators said they plan to take a top-down approach, selecting promising sectors and investing in strong companies within those sectors.
“Pharos Asset Management’s mandate is to identify investment themes in various markets and invest in sectors that could potentially capture the most returns. The investment universe is comprised of sectors and stocks that are undervalued irrespective of the weighting in the local index, explained Aboul Fadl.
The market, they believe, is well-positioned for an Egypt-centric fund.
We believe the Egyptian stock market was unjustifiably oversold given that Egypt did not have a financial system meltdown, said Orabi.
Outside of Egypt, the fund will invest in other MENA countries, though Orabi said that regional investments are likely to favor the Gulf.
“We believe with the stabilizing of commodity and oil prices, there are opportunities in Emerging Markets in general and the oil rich countries in particular, she said.
Pharos Investment Fund Company, a subsidiary of Pharos Holding, issued the fund, whereas Pharos Asset Management, another subsidiary, will manage it.
Pharos Holding was founded in 2004 by Mohamed Taymour. By 2008, it had closed LE 3.86 billion in deals.