ADFG fund reaps dividends from investing in undervalued equities

Goldilocks Investment fund has enjoyed returns in excess of 101% since the beginning of the year

Next time you see that a company’s share price is crashing, you might want to consider investing in that stock. Seriously.

For Goldilocks Investment, a $200 million (Dh734.6 million) equities fund under Abu Dhabi Financial Group (ADFG), that strategy of investing in undervalued stocks has helped it reap returns of 101 per cent so far since the beginning of the year. This at a time when the Abu Dhabi bourse’s index is flat year-to-date while Dubai is up just seven per cent.

So far, Goldilocks’ investments went to the battered stocks of Gulf Navigation, Gulf Finance House, and Eshraq Properties. ADFG’s strategy also involves being part of the management of these companies, with ADFG owning stakes in each of these Goldilocks Investment launched yesterday through the Abu Dhabi Global Market (ADGM). The fund itself has been active and was being tested for returns over the past 18 months.

It is the first fund on ADGM, with the free-zone’s authority now processing 12 more applications from other companies looking to launch funds there. Goldilocks is an equities fund that invests in stocks listed on the Abu Dhabi Securities Exchange or the Dubai Financial Market. firms and working with them to restructure their business.

“When we started 18 months ago, it was the worst time for equities… Some stocks this year are up 300 per cent, some are flat, and some are down, so the opportunities are always there; it’s about finding the right one.

“Typically, we don’t invest in blue chips for many reasons — the value-add that we bring is in the stress companies, companies with issues in business development or financial issues, so the companies we’re looking at are the mid- to small-caps,” said Jassim Al Seddiqi, ADFG chief executive officer.

Going forward, Goldilocks will continue to invest in undervalued firms in the UAE. For ADFG, an investment company managing $4.7 billion worth of assets, the strategy will be similar to that of Goldilocks.

“Our strategy will continue to be opportunistic and we will continue to be sector-agnostic and geography-agnostic. Having said that, we will concentrate more on the region because we think risk-reward in the region is much better than anywhere else at the moment. We will also be consolidating, synergising, going for more acquisitions and potential mergers,” the CEO told Gulf News.

He declined to disclose more details about new deals, but said they will focus on cost efficiencies.

“2016 was the biggest year for us in terms of activities. 2017, I think, will be a very difficult year globally and locally just like 2016, but we thrive on difficult years,” Al Seddiqi said.