Sell in May and go away — not this year
The old adage “sell in May and go away” applies not just to market volumes but also the general quietness of the summer months. Driven I believe as much by school holidays and the dash for the sun, it is usually quite difficult to do much productive work during the middle of the summer.
Perhaps it is the lockdowns and the UKs inconsistent policy on travel corridors that has kept more people in the office this summer than usual. The past few weeks announcements certainly have come as a surprise; new initiatives and some exciting projects and products to appear from the UK in the coming months.
The most recent announcement by Gatehouse Bank of a Shariah compliant facility to develop housing in the UK comes as a bit of a surprise; GBP500,000,000 is a big number to deploy. It is perhaps the largest initiative of its kind in the UK in recent years (including conventional markets).
The initial portfolio acquired is just over 10% of the overall target and there is a long way to go but the need is there and the demand for housing (as pointed out in an earlier IFN commentary, is substantial). The initiative is an excellent one given the shortage of quality rental homes in the UK.
Will the strategy address the social housing shortage? Are there any particular commitments to net-zero or energy efficient housing? Does Gatehouse have the infrastructure and market reach to be able to secure this size of investments?
Gatehouse’s partner, TPG, is a global player; there involvement in Shariah compliant financing could open up more opportunities for others to access TPGs liquidity to develop similar propositions in both developed and developing markets.
If Gatehouse can pull this off, it would be a significant milestone and secure Gatehouses future as a serious player in the UK banking sector.
In a related property transaction, and following a well-trodden path in a known asset class, ADIB’s Shariah compliant financing of the purchase of student accommodation in London repeats a common theme.
Student accommodation (new builds primarily) were a popular theme between 2015–2018; lots of GCC flowed into UK and a number of European transactions. This transaction does however show the lack of new ideas in the market.
Although there is talk of opening new markets and new opportunities for investing in areas as diverse as trade finance, SMEs and fintech/VC, “chunky” investments still stick to traditional types of assets.
It is safe to suggest that further work needs to be done to educate GCC investors as to the new opportunities available and diversifying investment portfolios away from property.
Keeping to traditional assets classes, Wahed’s progress in the UK market could be very impactful. Robo-advisory (and the follow on execution). The launch of Niyah and a Takaful solution are both big challenges for Wahed to take on.
Both initiatives have received some good publicity; the challenge will be the take up rates and how Wahed will bridge the education gap (as to the availability of the products) and keeping the acquisition costs low.
Technology no doubt will come in to play so it is a question of “watch this space”; which we do even when it is summer.
For further information contact:
Dr Scott Levy is CEO of Bedford Row Capital
slevy@bedfordrowcapital.com
This article was first published in IFN Volume 18 Issue 35 dated the 31st August 2021.
