Gulf Investment Fund
High-quality GCC exposure at a discount

Strong investment track record but share price below net asset value (NAV). We initiate coverage on Gulf Investment Fund (GIF), which is a closed-end fund listed on the London Stock Exchange (LSE), with a focus on listed equities within the GCC region. The fund has a strong track record and has outperformed the reference index in 10 of the 12 years since its inception. It is currently trading at an 8% discount to NAV compared with an average 5% discount for global closed-end funds and a 7% discount for emerging markets-focused closed-end funds. We think there is scope for this discount to narrow given the company’s commitment to a 100% tender offer in 2020 and the growing investor interest in the region.

Focus on Saudi and Qatar with tilt towards financials. GIF is predominantly invested in Saudi Arabia (44%) and Qatar (38%). It also has sizeable investments in Kuwait (9%) and the UAE (8%), but is not currently invested in Bahrain and Oman. In terms of sectoral weights, GIF’s biggest exposure is to financials (55% of the total portfolio), followed by energy (12%).

Attractive tender offer in 2020. The board is committed to launching a tender offer of up to 100% of share capital in 2020 (at the time of the annual general meeting, typically around November) at a price equal to formula asset value (NAV minus costs associated with the tender) and subject to shareholder approval. In our view, this would potentially allow shareholders to completely exit in two years without liquidity constraints. We expect the NAV discount to decline gradually as we approach 2020...


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