Janus Henderson pivots after acquiring NBK to expand in Gulf

Janus Henderson, a London-based investment firm with more than $380 billion under management and 25 offices around the world, is growing increasingly bullish on markets across the Gulf.

With its acquisition last year of NBK Capital Partners, the alternative investment arm of the National Bank of Kuwait, Janus Henderson deepened its footprint in the region and declared its intention to expand further. The firm cites stability in governance and massive infrastructure investments as central reasons that the Gulf states have become magnets for global capital.

In an interview with The Circuit, Meshal AlFaras, Janus Henderson’s Dubai-based Head of Middle East, Africa & Central Asia, goes into specifics about why the firm is boosting its investments in the region.

Among the growth areas drawing Janus Henderson and its peers are Sharia-compliant investments, where AlFaras sees great potential for expansion. The interview has been lightly edited for length and clarity.

What are some of the emerging trends in the region that you believe investors should be closely watching?

The Middle East? We believe in it. We are expanding in it. What are we seeing? We’re seeing lots of growth. That growth is happening in the UAE and it’s continuing. It’s reflected in Abu Dhabi, Dubai, the other Emirates, and now you see the focus going to Saudi. With their  Vision 2030, that’s another country where everyone should expand. With the higher ratings… as a quality sovereign and the money that is available in the local market, this can easily generate growth for the multiple decades that are coming. The Public Investment Fund is doing great work with their ambitions. MBS [Crown Prince Mohammed bin Salman] is driving that. He’s got the strategy, got the plan. Asset managers and global firms like us will do nothing but back them up. That is how I see the view for the region.

What sectors are you going to focus on at Janus Henderson?

There’s our recent acquisition of NBK Capital Partners as part of National Bank of Kuwait. We acquired that private credit team, and that private credit team invests in the GCC and the wider MENA region. If you just look at the growth in Saudi and their plans and ambitions, most of the banks are lending for the large infrastructure projects and they’re reaching their capital ratios with lending to all the mega projects in Saudi and elsewhere. But the focus should be on the neglected sector  –  the small and mid-cap sector.

It’s large here, but it’s small to the rest of the world, to Europe or the U.S. So that’s our focus area where we’re spending that money. We’re creating a new fund, a private credit fund, Sharia-compliant for the first time, and we are going to invest the money here. We are raising the money. We are seeding it. We’re raising money from abroad. Lots of people, including U.S. family offices, are committing to this fund to be invested in the region and those sectors.

What are some of the unique challenges when it comes to investing in the region?

The regulations are adapting. The governments here are working together to enhance the regulations. While the entire GCC has been formed for multiple years, they still don’t have full regulation where we can work across the entire GCC. Once we have one set of rules and regulations, that will make any investment much easier.

Look at the UAE, for example. There are three regulators when it comes to the financial world. You have the DIFC (Dubai International Financial Centre), you have ADGM (Abu Dhabi Global Market), and they both have their own regulators, plus the SCA (Securities and Commodities Authority). So that’s just in one country. We have three regulators. Then to move to Saudi, you have another regulator, and Kuwait is the same thing. I’d love to expand in Kuwait and other countries, but we need better and clearer regulations before we can move into them.

What do you think is the role of the sovereign funds here in terms of shaping market trends?

Sovereigns have deep pockets to invest. And the focus right now for them – yes, they can invest – it depends on which sovereign wealth funds you’re talking about. In every country, there are multiple sovereign wealth funds now. If you look at Sanabil or the PIF, their focus is mainly to invest in the country. If they invest outside, it will be in the core direct investments, something that aligns with the future and the growth in their country. The scale-back that many people talk about in Neom and that other projects face? We don’t see it as a scale-back. We see it as an opportunity for them to focus on those projects piece by piece. As they say Rome was not built in one night. People like us, Janus Henderson, and other international firms have emerging market credit teams focusing on investing in regions like the GCC. 

Are we seeing cross-border investments, for example, from the Middle East to Central Asia or Africa?

Yes, though not as much as we’d like to see. Foreigners are taking baby steps. I opened the office here or the regional office back in 2012. We knew nothing ,or the firm knew nothing. We have 2,500 employees around the world. For the employees or the teams or top management to learn more, it took us that long to learn more about the region. And that’s where now we’re tapping into the market and doing the acquisitions and the expansions and the investments.

We’re hiring more teams. We acquired NBK Capital Partners. So we believe we know where they’re coming from and their track record, and we’re investing. And with that, I also see our peers doing exactly the same thing. Now they’re investing in local talent, investing in local knowledge, and aligning themselves with the governments in order for them to grow. Not just Janus Henderson, but you’ve probably seen lately that BlackRock created a new infrastructure fund worth $5 million to be invested in Saudi or in the region.

I’m sure many others will create more, including us, to invest in the region. And we see demand. We see lots of demand for investors, especially to invest in the region. I mean, if you look at the emerging market debt, that’s by itself within the region. It wasn’t covered as much as it is today. We have a team that sits in Denmark, covering emerging market debt, and they come here regularly. They used to come once every three to five years. Now they’re coming three to four times a year. So that’s a big shift, and that’s where I see the trend.

Why are we seeing this trend? Why are we suddenly seeing more influx of capital?

I think the stability of the government is playing a big role. The GCC is not like other emerging markets or frontier markets where you see instability in governments and changes in governments. Our rulers have been here for multiple decades, and their aim and vision are to believe and flourish, to invest in the people of the countries. And the people have seen it. They’ve seen the World Cup in Qatar. It’s one of the best organized globally. You’ve seen many World Cups. The best was in Qatar. And in Saudi Arabia, they just won the next World Cup for 2034. That will be another impressive organization and event. Many others are following.

Now, the entire region is shining globally. You see how many firms are coming to the region. Look at the DIFC by itself. Five years ago, we were 20,000 employees. Today, we’re over 41,000 employees. See the growth, see the demand. That’s just in the past five years. Similarly, in ADGM, record growth. And then, even if you come, any small or large institutions get supported by the infrastructure, by the sovereign wealth funds.