Schroders' Middle East and North Africa fund will be heavily weighted toward Egyptian and UAE construction stocks as it seeks to quadruple its size to $1 billion in 2010, fund manager Rami Sidani said.

The fund believes fast-paced economic growth and a rising population make Egypt the best investment pick in the Mena region, along with UAE construction stocks and Turkey's financial sector.

Sidani, who manages the $225 million Dubai-based Schroder International Selection Fund Middle East fund launched in September 2007, told Reuters Television in an interview:
'Egypt in North Africa is like China in Asia ... The country is the most compelling story in the Mena.'    

'With stock market stabilisation and the recovery of the oil price, our target is to reach $1 billion in 2010,' he said.

The fund aims to maintain a 10 percent exposure to the Egyptian market within the next couple of months but could increase this figure.
 The fund's top holdings are still Turkey- and Gulf-centric, with Turkiye Garanti Bankasi accounting for 7.5 percent, Saudi Arabia's Sabic at 7 percent, Emaar Properties at 4 percent, and Qatar Industries at 4 percent.

It has underperformed Middle Eastern markets by 12.2 percent and the MSCI Arab Markets benchmark by 8 percent in the year to September 2009. The Arab benchmark has in turn lagged the MSCI Emerging Markets Index this year.

Sidani said a sharper risk appetite, recovering oil prices and rebounding equities would herald a turnaround in the fund's fortunes.

'Our markets have lagged other emerging markets by more than 30 percent, so we expect our regional markets to start playing catch-up and outperform other emerging markets in the short and medium term,' he said.

He said UAE infrastructure and construction companies that are recipients of increased government spending would constitute his top picks in the Gulf Cooperation Council (GCC) in 2010. - Reuters