By Brandon Nickerson, from Emerging Manager Focus
Egyptian-based Beltone Financial adheres to the philosophy even-keeled investing and a portfolio range make for sound performance as a firm. CEO Aladdin Saba sat down with Brandon Nickerson of Emerging Manager Focus to answer a few questions about his firm, differences between investing in the East vs West, and the state of the Egyptian vs. Global economies.
Emerging Manager Focus: What potential do you see in small firms and emerging managers given current economic conditions?
Beltone Financial: “In our region, things are better than the west. We are not as leveraged and are expecting consumers to start coming back. Consumer based sectors (real estate, apparel etc) are strong and are going to get better. Small companies have a harder time accessing credit than western companies, but still have favored well compared to the rest of the world. Loan to deposit ratios are very low compared to the United States in Europe so its hard for these companies to access capital. There are also more conservative practices here which might have cushioned the fall compared to western countries. Overall, small firms have favored fairly well and are fairly optimistic about the recovery. The state of emerging managers given these conditions are not as bad as a year ago, but it is still not easy for smaller firms to raise assets [and the subsequent] seed capital.”
EMF: Do you agree with evidence demonstrating smaller funds are currently outperforming larger funds?
BF: “Not sure I agree with that because there is a distinction between smaller funds and larger funds. It is not a matter of size, but of the strength of the balance sheet.
Larger funds may outperform smaller funds, but if you take a look at the balance sheet, there might be billions of dollars of toxic assets that they might not disclose. I’d say to talk a little bit about toxicity of assets and how they might cause big companies to appear less stable [is a key difference with] smaller funds.”
EMF: What are some of your strategies? Which of these do you find works best and why does your company use these particular Investment Strategies?
BF: “We have different pockets (and) different business groups under Beltone financial. For our private equity group, we have been acquiring majority stakes in companies. We don’t do restructuring, turnarounds. We have been looking for growth capital, and provide capital for the next stages of growth. Private equity focuses on Egypt, not sector specific, looking at the entrepreneur of the company, with smaller companies we look at market dynamics and how they differ from the larger companies. Larger are specific to focus on agricultural/agribusiness. You find a lot of state investors looking to secure good investments, benefit of securing supply for companies. Consumer businesses are very good areas to look into….telecommunications, (and) textiles…. as they were beaten up this year and are looking for investors (to) invest in when equity is needed.”
Beltone did not see the same response to the global economic crisis as did American and European investors with increases in small and emerging firm investing. Rather, the lag in the economy felt in Egypt mostly effected service areas which are now starting to see an upswing. This is a trend Beltone and many other Egyptian firms are now tapping.
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