Dubai-based asset manager Invesense is a strong believer that the market collective provides a good indication of how shares will perform over the medium to long term, having used such guidance to achieve decent returns on its Shariah stock portfolio.
Eschewing predictions whether any counter is over- or undervalued, CEO Faisal Al Osaimi said: “You cannot consistently outperform the market over the long term by second-guessing the market. There has to be another way. We think that we have a more reliable and safer way for our investors.”
Invesense adopts a quantitative strategy to investing, having developed its in-house model based on research by 2013 Nobel laureate for economic sciences Eugene Francis Fama with another renowned US business professor Kenneth French.
Faisal described this strategy as being similar to that adopted by several other outfits for conventional investments, but Invesense takes a small deviation after selecting stocks in companies that show characteristics of high returns — being among the top 30% or 40% of their respective sectors.
Looking at the aspects of quality, momentum, size and value, Faisal said the strategy applies momentum from the market perspective — as those signals telescope potential upward or downward movement of certain stocks.
“This may not give the highest returns as active management, because the high volatility also attracts risk of high losses. Our quant Shariah method provides a steadier return with a more reasonable management.”
Faisal shared how since 2017, the Invesense Sharia Global Equities Segregated Portfolio has largely outperformed the MSCI USA Islamic Index — but admitted this strategy does not work in smaller markets like Bahrain or Oman where there is very little liquidity. Noting the strategy can be applied well to the GCC region as a whole, due to the vast liquidity of equity trades in Saudi Arabia and the UAE, Faisal added: “We tested our strategy in 25 stock markets and it works in emerging, international and US markets.”
