Investment banking with a difference: Interview with the CEO of TFI

Khalid Yousef Al Subeai, chief executive officer of The First Investor (TFI), the shari’ah-complaint investment banking arm of Barwa Bank, believes investors must be given lasting value. But that is just one component of Al Subeai’s motivations. Sitting down with The Edge’s Aparajita Mukherjee recently, he also discussed his firm’s broader investment philosophy and the changes in Qatar’s business and banking that Al Subeai has seen from working at Qatar Petroleum, and Morgan Stanley, to the present day.

With QAR2.6 billion worth of assets under management, TFI is busy charting new funds in new geographies. TFI has real estate funds in Saudi Arabia, the United Kingdom, the United States (US) and Brazil. It also has an equity fund that is pan-Gulf Cooperation Council (GCC).  

The investment firm, according to chief executive officer (CEO) Khalid Al Subeai, is also particularly proud of its investment in the Qatar Education project, where it partners with GEMS, one of the leading K-12 school operators in the region, as well as with financial institutions such as the Qatar Insurance Company.

“Education is one sector which we have decided to participate in and become a leading player through strong associations.” 

Al Subeai explains that for TFI, investing in Qatari education is part of differentiating themselves in the market. “This is one sector which we have decided to participate in and become a leading player through innovative structures and strong associations,” he says. 

A wider motive behind the education project, he adds, was to open up new investment sectors for TFI. “I think that it gives us immense satisfaction that TFI has been able to penetrate the niche in the Qatar education sector and partner with leaders in the education business to provide quality education to the Qatari market,” Al Subeai  says. “We are ambitious on adding greater value through similar initiatives [to] aim at creating a market for sustainable real estate in the schools sector and create a unique platform for partners to earn stable long-term cash flows through the underlying operations of the schools.” 

Beyond local schools, TFI has also recently announced the closing of a USD390 million (QAR1.4 billion) Shari’ah-compliant financing deal in a US development project. The financing was among the largest ones completed in the US, says Al Subeai. TFI was instrumental in structuring the transaction together with the TFI US Real Estate Fund’s CityCenterDC development partner Hines. CityCenterDC is the flagship investment USD700 million (QAR2.5 billion) of the fund, which was launched by TFI in 2011 under patronage of Qatari Diar, real estate investment arm of the Qatar Investment Authority (QIA). 

The ambition, scale and profile of this development are commensurate with its status as Qatar’s first major real estate investment in the US. “Optimising investments capital structure further adds value to our investors,” furthers Al Subeai.

Investment banking

Internationally, the investment banking market has undergone many  changes since the recession in 2008 and 2009. For one, investors have become more wary and do their own due diligence above that of a fund manager or investment bank. Customers are also demanding income-generating products and assets. On how the market has changed in Qatar over the past, Al Subeai is of the opinion that investment banking in Qatar has become more competitive. Many local banks, he points out, have established their own investment banking subsidiaries or affiliates, and thus the pool of investment banking services and products has increased.

“The gains of investing in our income-generating real estate funds is tangible. Investors earn between seven and nine percent.”

Explaining this phenomenon, Al Subeai says, “You have the local investment banks and the non-local investment banks registered and operating out of the Qatar Financial Centre which increases the competition a little bit. But on the other hand, increased competitiveness results in hopefully a better product or service to the…client.”

TFI’s investment banking philosophy is simple: to add value to the clientele in a transparent manner. “We are a local Shari’ah-compliant investment company that has a track record of bringing value added products to our clients and investors,” adds Al Subeai. “We are a Qatari investment bank regulated by the Central Bank and work closely with our parent company Barwa Bank in structuring and placing products.” The existing client list of TFI, he reveals,  spans big corporates, high net worth individuals and retail clients (accessed though Barwa Bank). TFI’s funds are designed to access sectors to invest in Qatar and internationally.

On returns, Al Subeai says that through their products and services, TFI offers the investors a yield of enhancement over the existing exposure that they are currently entitled to.“For example, an investor might earn three to four percent for investing in equities, whereas our products are income-generating. The gains are tangible and they earn between seven and nine percent. It is a clear value-enhancing proposition that we can offer to our clients.

Asset management

TFI recently launched the TFI GCC Equities Opportunities Fund (Q), an open-ended fund investing in equities and equity-related securities listed on exchanges in the GCC countries. The fund is seeking to achieve long-term capital growth through investments in a broadly diversified regional portfolio of stocks. The fund managed to attract more than QAR100 million during the first few months following its launch, making it one of the biggest open-ended funds domiciled in Qatar. Since inception, the fund has achieved double-digit returns. This fund was awarded Best Islamic Investment Fund at the Banker Middle East Product Awards 2013. Looking forward, equity markets should attract significant amounts of liquidity as investors are getting low to negative (after inflation) returns from holding cash or low-yielding fixed-income securities. 

Professional changes

Personally for Al Subeai, his career trejectory from Qatar Petroleum (QP) to Morgan Stanley and now to TFI has been a natural transition. He says that as part of QP, a state hydrocarbon firm, it was the perfect platform for a fresh graduate to start his career in terms of governance, discipline, working in a professional environment, managed by international principles and guidelines and working with international partners. QP set the nucleus of Al Subeai’s career, it shaped his integrity and his work ethic and it is here he says that he learnt the basics of the debt capital markets.

“After six years at QP, I thought the natural next step would be to develop outside of the state-owned environment,” continues Al Subeai, “and I was approached  to represent an international investment bank in Morgan Stanley, which provided the perfect growth opportunity for my career in terms of being exposed to an international franchise, its brand strength, its products, its services and its global scale of activities.”

QAR2.6 billion - Total assets under management of TFI.

The two-and-a-half-year stint at Morgan Stanley exposed Al Subeai to asset management, the commodities markets, the intricacies of investment banking and the entire investment platform, all of which he feels are helping him in his current position at the head of TFI. 

Investors and clients

To have a long-lasting relationship with clients, for Al Subeai, nothing works better than being transparent. This is especially true of an entity such as TFI which, being Qatari, is based in the same place as many of its clients. “I think it provides comfort to investors, the fact that we support all of our products through providing seed capital,” says Al Subeai, underlining the importance of nurturing customers as, he thinks, investment banking is all about relationships. 

“TFI believes in serving the customers’ needs through a variety of platforms. We can assist them through our investment banking capabilities, advisory, capital raising or we can do it through our real estate team who can advise on real estate transactions, aiding them to invest through our real estate projects. We also have equity or asset management solutions where an investor would be interested to gain exposure to the equity markets.” 

TFI, he adds, can can advise investors on how to invest in the Qatari market and also in the regional market, all in a Shari’ah-compliant manner. 

Given the volatile nature of the investment banking market, investors have become more sophisticated and cautious, even though the Qatari market is cash-rich and liquid compared with the other markets in the GCC. They have also become much more demanding and want to have a say in the sectors in which they want to invest, not merely entrusting this to a fund manager. 

According to Al Subeai, the investor knows from day one where his money is going and if they are going to acquire property or assets that produce income. “We do not rely on speculation or opportunities that will only provide a return in two or three years’ time,” he explains. “This is a huge draw for many investors”

Qatari market 

The Qatari market, according to Al Subeai, obviously has had strong growth on the back of the increase in GDP in recent years. The increase of income per-capita over the past couple of years backed by the increase in production and export of commodities, liquefied natural gas, is a compelling economic success. “I think the fact that the government is proactive and is willing to invest for the betterment of the country,” he says, “makes for a very sound investment proposition.”

Al Subeai is emphatic that the political will of the Qatari government in its deployment of significant capital into developing the country’s infrastructure, healthcare and education is creating opportunities for the business community within the private sector and also for individual investors. 

“These are strong enough reasons why I feel Qatar is a business-friendly environment, backed as it is with strong government support. To top it, Qatar is politically stable, I think that we have a lot of positives in Qatar and we look forward to continue taking part in this tremendous growth story.”