‘Insatiable demand’ for Fixed Income: SICO

Demand for high-quality fixed income assets will remain insatiable during 2016, as long as oil prices and interest rates stay low. This is the outlook of Bahrain-based Securities & Investment Company (SICO), following its latest review of the global and regional fixed income markets.

Global deflationary pressures and a slowdown in China, along with negative interest rates in Europe and Japan, are likely to limit rates from widening much this year. The divergence and volatility in international markets during the first two months of 2016 has led to significant mispricing and opportunities within the GCC bonds and Sukuks.

According to SICO, bottom-up analysis has the potential to add significant value on the back of the weak macro environment. GCC fixed income now offers one of the highest sources of income among global fixed income and dividend-paying assets.

GCC governments have significant room and the necessary versatility to improve their credit through various fiscal measures, along with subsidy cuts and the hike in petrol prices implemented in recent months.

In its second full year of operations, the Fund delivered a return of 1.9 per cent compared with 1.7 pc by the Barclays Emerging Markets GCC Bond Index. Since inception, the Fund’s return has been 9.9 pc, outperforming the index by 1.2 per cent net of fees. The SICO Fixed Income Fund paid two dividends in 2015 at US$ 3 per unit.

SICO CEO Najla M Al Shirawi, said, “SICO’s success stems from its disciplined investment strategy, conservative approach, and the quality of its in-house comprehensive research capability.”

Launched in April 2013, the SICO Fixed Income Fund actively invests in government and corporate fixed income, Sukuk, money market instruments, and other fixed income-related instruments.

According to Head of Fixed Income Ali AR. Marshad, “The Fund’s performance is mainly attributable to our UAE-based exposure and floating rate exposures; as well as our 20 pc allocation to Turkey and Asia, both of which posted an encouraging performance during 2015.”