The resolve to succeed surmounts challenges
“In 2015, our resolve to overcome challenges through conforming to our guiding principles, enabled KAMCO to emerge more confident and determined to abide by its strategy, in order to achieve sustainable results and maximum returns for its clients and stakeholders.”
We entered 2015 with a vision to not only improve and progress but also exceed market expectations. The year was evident proof that KAMCO’s rapt focus on remaining a beacon of stability, achieving exemplary results, and offering innovative products for our stakeholders, still propels us forward albeit the turbulent economic landscape. Throughout the economic and geo-political instabilities witnessed in 2015, KAMCO abided by the pillars of our sustainable investment strategy, pushed through with a drive to constantly develop and improve, capitalized on challenges to unearth concealed opportunities, and thus emerged stronger, affirming our leadership and resilience.
The ongoing economic turbulence triggered a slight short-term dip in our profits for the first nine months of the year. We began to see significant momentum during the last quarter, assuming our leadership position by registering a net profit of KD 523,688 for the year ended December 31, 2015. These results are a reflection of our rigorous process that is both sustainable and progressively developing with time, complemented by the teamwork of our distinguished experts at KAMCO.
Looking in the rear view mirror, KAMCO encountered headwinds during the economic crisis but stood tall whilst the economic conditions spiralled downwards. As the economy dipped to new lows in 2015 with steep market volatility due to China’s currency devaluation, the extended slump in commodity prices, and record-low oil prices, KAMCO maintained operational revenue and remained profitable.
Throughout the past 17 years, our devotion to putting our shareholders and clients’ interest in the forefront, coupled with a progressive and prudent investment strategy guided our actions to generate market-beating results for clients, and KAMCO as a whole. Our adequately conservative investment philosophy, product innovation and stringent risk mitigation measures, still steer KAMCO towards a significantly growing but more importantly stable pathway.
Developing maximum-yield returns via innovative solutions
Following our principles of providing quality advice and customized product offerings, we strive for proven results by developing innovative products and services that put our client-driven philosophy in action. As a result of our sustainable and prudent risk deduction approach, our carefully managed funds and assets have overall exceeded set benchmarks during 2015, despite sharp fluctuations in local and regional markets. The KAMCO Real Estate Yield Fund (KREYF), which was launched in January 2014, outperformed its counterparts in the market, generating 5% returns since inception. In 2015, the fund distributed 3.70% dividends, increased its AUM by 125% since establishment, and is continuing its path to providing investors with returns and long-term capital growth in the target markets.
In 2015, our Product Development team was also successful in obtaining the CMA operational license for the KAMCO MENA Plus Fixed Income Fund (KMPFIF). The fund primarily targets higher returns in comparison to short-term deposit rates and was successfully launched in the first quarter of 2015 and closed the year with a return higher than set benchmarks. Our Kuwait Education Fund (KEF) and Kuwait Private Equity Opportunities Fund (KPEOF) also performed exceptionally well throughout the year, with KEF delivering a gross IRR of 8.48% as of the financial year 2015 and 1.13x return on realized investments. Whereas KPEOF, which was launched in 2004, managed to survive the recent credit crunch and the financial crisis spanning 2008-2009, unlike many of its competing counterparts. The fund delivered a gross IRR of 1.12% and 1.14x return on realized investment. Our Alternative Investments team is currently aiming to divest assets under KPEOF and further seek structured opportunities that would yield higher returns for our clients. KAMCO’s GCC Opportunistic Fund has returned 27.96% since inception, significantly outperforming its benchmark; the S&P GCC Composite, which returned -5.35% over the same period. In 2015, the fund outperformed the benchmark for the third consecutive year by almost 1.8% net of fees. Meanwhile, although our KAMCO Investment Fund (KIF) recorded a negative return of -11.58% in 2015, its performance exceeded the Kuwait Stock Exchange Weighted Index that declined by a steeper 13.03%. Nevertheless, on a longer timeframe, the fund outperforms the benchmark over the trailing three and five year periods.
Our discretionary portfolios achieved another noteworthy year of performance, with all accounts posting positive returns for the year and significantly outdoing their mandated benchmarks. With these successes in hand, the team is aiming to further develop and expand our offerings in 2016 to include long-term investment plans, an open-architecture platform, as well as structuring and launching new product offerings in different asset classes to tap future market opportunities and generate higher returns. Meanwhile, as we expect the conditions to improve in 2016 for private equity, our team will remain committed to increase their exposure in this space with innovative and targeted products.
Developing proactive investment banking services
The economic recession took a toll on investor confidence as well as market expectations leading to fewer investment banking transactions in Kuwait. However, despite the tough times, the Investment Banking team has managed to successfully execute 85 transactions since inception until December 2015 valued at more than USD 12 billion, and continued to provide top-notch services including Sell Side/Buy Side M&A advisory, debt issuance, and capital restructuring advisory services. During 2015, the team, acted as joint lead manager in successfully executing the issuance of the National Bank of Kuwait S.A.K.P.’s (“NBK”) KD 125 million, 10NC5, Subordinated Tier 2, Basel III - Compliant Bonds. This private sector corporate bond issuance is considered the largest in the history of Kuwait. This transaction highlights KAMCO’s continued success in providing prudent investment management services and its role towards catering to and augmenting the local, regional and international markets. Going into 2016, the team signed a cross-border assignment in the pharmaceutical sector for assisting one of its clients in selling its significant equity stake to a regional industry player, a deal that is to be culminated by early-2016.
Developing a 360° approach through comprehensive analysis
Our journey always begins with a well-structured decision making process. KAMCO’s research services play a vital role in mapping out the ideal investment solutions fitted for each individual client. In 2015, the Investment Research team took a leap by expanding our research offerings and introduced new levels of analysis. Our research continues to be published in commendable financial networks such as Reuters, Zawya, Capital IQ and FactSet, keeping our stakeholders well acquainted with the latest updates in the market. Besides developing the foundations for our investment selections, our research experts work around the clock covering Kuwait, GCC and the MENA region through a platitude of comprehensive market reports, sector reports, equity reports, and newly-introduced technical analysis reports that provide valuable market insights to the investment community on a daily, monthly and quarterly basis.
Developing extensive product coverage
Our Wealth Management team draws upon our leadership position in all related disciplines, by offering an extensive range of products that few firms in the GCC can match, and with personalized client service that is in par with and exceed their expectations, meanwhile serving to grow their wealth even in challenging and volatile economic conditions. Recognized as innovative since our founding, and known for our enduring client relationships across market cycles and generations, our practices are grounded in experience and have guided clients through times of prosperity and uncertainty. We integrate our capabilities and resources into customized services that fit the present and future needs of each individual client. As a result, our Wealth Management team was active in initiating and raising funds for various KAMCO products as well as external mandates. The team successfully raised capital for our Kuwait Real Estate Yield Fund (KREYF) and closed the KAMCO MENA Plus Fixed Income Fund (KMPFIF).
Developing a seamless client experience
At KAMCO, we continue to ensure that our clients’ investment experience is at par with the standards of our products and services, and in line with KAMCO’s proactive information risk management practice, which integrates people, processes and technologies. As a result, many strategic technological initiatives were launched as a part of our business process digitalization plan. This lead to further enhancing and facilitating the client’s experience, improving revenue generation across all business units, developing KAMCO’s security posture, and improving efficiency through extensive reporting systems.
During 2015, KAMCO’s Information Technology team has served portfolio clients with a revamped detailed Portfolio Evaluation Report, which offers an in-depth visual and detailed analysis about each client’s portfolio holdings. Our clients are also constantly notified via emails and SMS alerts regarding their transactions. In addition, our IT team introduced a mobile application for employee emergency contacts, co-located critical systems and services as well as devised appropriate disaster-recovery plans that are in line with KAMCO’s corporate sustainability plan. We also upgraded our IT infrastructure to include additional information security controls that provide adequate business protection and regulatory compliance. This area will witness a more exciting development in 2016 as we strive to advance our clients’ experience through seamless interfaces and technology.
Developing business operations through high standards
Reflecting our firm commitment to higher compliance standards, our Compliance & Risk Management team worked diligently to ensure compliance to the recent regulations introduced by the Ministry of Finance in relation to the FATCA law as well as other new by-laws issued by the CMA in Kuwait. The team rigorously follows up with the authorities to understand and expedite the process in order to meet all the necessary standards. In addition, KAMCO formed a designated committee to ensure timely and complete compliance with the new CMA law requirements and its related executive regulations. Besides the latter, our team is also extensively and actively involved, both directly and indirectly in assisting regulators formulate new policies and procedures that support the investment community.
Developing world-class talent
In 2015, KAMCO witnessed a move towards becoming a talent development institution. Our aim is to unearth and enrich existing talents on a day-to-day basis, acquire new skills, and utilize international best practices to build up towards a unified corporate goal that is in line with our business strategy. All this will culminate into a healthier and more efficient working environment that would also yield personal satisfaction.
These efforts lead to a commendable 86% retention rate in 2015 and an increase in our Kuwaitization percentage. The year was only the beginning, as we organized multiple ongoing innovation workshops, productivity seminars and training courses that focused on strengthening organizational culture amongst which was the “7 Habits of Highly Effective People” workshop. We also conducted executive training sessions including but not limited to “The 4 Disciplines of Execution” series in collaboration with some of the world-renowned training experts such as FranklinCovey. Conforming to our corporate objective of delivering proven results, the HR team introduced the K-Scorecard. This balanced scorecard is a new comprehensive performance management tool that is designed to translate and align employee talents and objectives with our corporate strategy. This enables us to evaluate and report performance results more accurately. The K-Scorecard is also used for implementing our incentive schemes and developing our training needs analysis.
Developing and supporting the investment community
As a leading investment company, we consider it our duty to support and add value to the local market, by organizing professional conferences and seminars that benefit and educate the local investment community. As such, our Marketing team was diligent in organizing and participating in a multitude of events, amongst which was hosting the renowned Nobel Laureate and Chief Investment Strategist at Janus Capital Group Inc. (Janus), Professor Myron Scholes, to discuss asset allocation and risk management. Towards the end of 2015, KAMCO also hosted a prestigious debt capital market conference in Kuwait, in partnership with The Gulf Bond and Sukuk Association (GBSA). Our aim in hosting such a panel discussion-based event, which coincided with the introduction of new by-laws by Kuwait’s Capital Markets Authority (CMA), was to educate the market and aid in further developing the bonds and sukuk market.
Developing a solid reputation through international recognition
With each of the aforementioned achievements under our sleeves, we are proud to have been voted as “The Best Investment Management Company in Kuwait 2015” by the prestigious World Finance magazine. The award was based on a number of criteria including performance, premier service, leadership amongst competitors, consistency in delivering results, and achieving our business objectives amidst the gloomy economic backdrop. KAMCO’s success was also recognized by MENA FM magazine, and entitled the “Kuwait Asset Manager of the Year”. This recognition was based on KAMCO’s performance in the asset management sector and our noteworthy AUM in the region. During 2015, we enhanced our media exposure on all channels, staying ahead in the market, with the most extensive press coverage in all the prominent local newspapers. We also increased our coverage in GCC countries; a pre-emptive move that is in line with our expansion strategy. Furthermore, we boosted our presence on Social Media platforms by remaining on top of financial updates and recent world events, further solidifying our presence and our robust reputation.
Developing our community through Corporate social responsibility
It is without doubt that KAMCO’s business achievements go hand-in-hand with being responsible members of the society. Our CSR initiatives are based on a philosophy that garners special emphasis to empowering and supporting Kuwaiti youth, along with our ongoing humanitarian initiatives in the field of health, education and environment. During 2015, we undertook a number of internal and external CSR initiatives, where we amplified our focus on enhancing internal communication. We engaged our employees in a plethora of CSR causes that brought us closer to each other and to the communities in which we serve, in addition to other internal employee-focused activities and initiatives. We also organized an artistic talent competition to showcase the hidden talents of KAMCO employees, and allow them to express their creativity and passion. The submissions contributed to creating our 2016 calendars themed “Our vision is driven by talent”, and serves to acknowledge that KAMCO has always been driven by talented individuals whose excellence beyond the job description played a key role in carving the company’s position within the local and regional markets and allowed us to exceed market and investor expectations.
2016: Towards progressive development and exceeding boundaries
Moving forward, we look at 2016 with optimism and a renewed faith in our abilities to generate market-beating returns for our clients and shareholders, despite the expected difficult conditions. Our agenda for the year includes regional expansion plans in the near term, further diversifying our product offerings, strategic penetration of neighbouring markets in the GCC and MENA region as well as further fostering and formulating local partnerships.
To echo our Chairman, KAMCO is and will remain a trademark for trust, security and I add leadership, and with a renewed outlook along with your continuous support and cooperation, we shall pave the way to further growth, and a more successful 2016.
Gratitude and appreciation
With this, I must strongly acknowledge that our market position and performance rises from the commitment, prudence and hard work of our trusted employees. The unique talents and expertise that each individual brings to the table allowed us to emerge successfully amidst the turbulent economic conditions. I would also like to extend my deepest gratitude and appreciation to our revered shareholders and clients for their constant support and loyalty, as well as the Board of Directors, executive committee, and executive management for their perseverance to innovate and find solutions, which relentlessly steer KAMCO towards growth and success. Finally, I would like to commend market regulators, government officials and everyone who has paved the pathway to KAMCO’s success, and whose role was instrumental in supporting the investment community as a whole.
Faisal Mansour Sarkhou
Chief Executive Officer