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National Bonds CIO 'left after spat'

Dubai, May 19, 2010

The former chief investment officer of the United Arab Emirates' National Bonds Corp left due to disagreements with senior management over the savings scheme's investment strategy, two sources told Reuters.

The state-owned firm, which pools retail investors' savings, has invested almost half its total assets of about 3.9 billion dirhams ($1.06 billion) in property projects unlikely to yield significant return for years to come, one of the sources said.

Investment head Jacques Bernard left the firm on May 2 and was replaced by Omar Subhi, but as chief financial officer.

Two sources familiar with the matter said disagreements over investment allocation led to the departure.

"He left the company because of disagreements over investment strategy," said a banker, speaking on condition of anonymity. Jacques Bernard did not return a phone call seeking comment.

Bankers said National Bonds invested heavily in real estate projects -- one banker said the figure was about 40 percent of its assets -- with some of the projects connected to its majority shareholder, the government of Dubai.

"Real estate investment reflects a portion of the overall National Bonds investment portfolio, which invests in a number of different sectors and in a variety of Sharia compliant projects," National Bonds chief executive Mohammed Qasim Al Ali said in an emailed statement to Reuters.

Unlisted National Bonds rarely provides detail about its investment strategy. One of the sources said the company had invested in property developer Nakheel's 2009 Islamic bond, which was repaid after a bailout from Abu Dhabi.

In April, Ali told a local newspaper the firm invested about 50 percent of its funds in liquid instruments. The other half is invested in direct projects such as private equity, he said.

"One would think that like annuities everywhere National Bonds would have invested in stable, conservative, cash-flowing assets," the banker said. "Most or many of those projects have stalled, and won't pay out any cash for possibly years to come."    

The savings scheme returned 3.54 percent to investors in 2009 and 7.07 percent in 2008 despite challenging market conditions. The state Investment Corporation of Dubai (ICD) owns 50 percent of the company with each of its local shareholders, comprising property developer Emaar Properties, Dubai Holding and Dubai Bank, holding 16.6 percent ownership, according to the company website.   

ICD did not immediately respond to an email seeking comment. Annuity funds typically place most of their investments in assets more liquid than real estate. National Bonds launched its own real estate projects such as Sky Courts, a residential development in Dubailand, a multi-billion dollar theme project which is on hold in the wake of Dubai's property crisis. - Reuters




Tags: Dubai | National Bonds |

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