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UAE bank NBAD plans to launch new bond fund

Fund seeks return of 5 pct, to invest in bonds, money mkt.

September 22, 2010 12:39 by

National Bank of Abu Dhabi , the second largest lender in the United Arab Emirates, on Wednesday said it plans to launch a bond fund to tap into growing demand for fixed income products.

The NBAD Cautious Income Fund will invest in a range of bonds and money market instruments in the UAE and the Middle East North Africa (MENA) region, targeting an average return of 5 percent.

“The new fund meets the need of investors who desire a low-risk product that hedges against the uncertainty of equities market and real estate investment,” Alan Durrant, chief investment officer at NBAD’s asset management group told reporters on Wednesday.

The bond market in the region contains some 100 securities, mostly dollar-denominated, largely in the UAE and the Gulf, said Mark Watts, head of fixed income at NBAD’s asset management.

The fund is targeting an initial size of between 100 to 200 million dirhams with a launch price of 5 dirhams, he said, adding that as investors increase the fund will also invest in sukuks and other fixed income instruments.

The fund will invest mainly in high quality sovereigns and companies and may also invest in NBAD’s bonds depending on the price, he added.

“Fixed income as an asset class is not addressed much in the Middle East. It is a trend that will come to the market here,” he said.

Governments and companies across the Gulf and MENA region are investing heavily in expanding infrastructure and other projects that are mostly financed by bonds, creating opportunities for investors to invest in fixed income instruments.

NBAD, one of the largest asset managers in the region, manages assets worth about $1.12 billion.

(Reporting by Stanley Carvalho, Editing by Dinesh Nair)

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