The United Bank of Kuwait (UBK) has raised more than double the expected sum for its new investment product, the guaranteed emerging market linked deposit (GEM). The GEM is to invest in Brady bonds, issued in emerging market debt restructurings.
The deposit was expected to raise $10 million when it was launched in May, but had raised more than $22 million when it closed for investments on 22 June. Its success was due to UBK fully guaranteeing clients’ initial investment, bankers say.
‘In the prevailing financial climate investors want to put their liquidity into products with guarantees,’ UBK’s head of investment division marketing Nick Anderson says.
If the deposit performs badly, investors will receive at least their initial capital investment at the end of the deposit’s three-year term. With this incentive, ‘we found that demand exceeded our initial expectations’, Anderson says.
The London-based bank is examining the potential for other guaranteed products to be launched in the next few months. These products could include a commodity guarantee facility.
The GEM raised funds from more than 100 clients. The funds will be invested in government bonds issued by Mexico, Argentina, Brazil and the Philippines (MEED 10:6:94). The rate of return to the investors is based on the yields from a basket of this debt.
UBK has introduced nine new investment products since 1991, including a guarantee deposit investing in UK equities, a strategic currency fund, a second US high yield bond market fund, three funds investing in UK and US property and funds tailored for the Islamic market.