Interviews

Rita interviews M. R. Raghu, Head of Research at Kuwait Financial Center (Markaz) & Managing Director of Marmore Mena Intelligence

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Blue Ocean Global Wealth: How do you explain the landscape called Middle East and North Africa (MENA)?
Mr. Raghu: Often investors from developed countries paint the MENA region, as a whole, with the same brush. However, the region is comprised of two distinct segments. On one hand, we have the oil exporting nations, comprising six countries that constitute the Gulf Corporation Council (GCC). GCC is a regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf, except for Iraq. Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. These countries have enjoyed steady economic growth – driven majorly by hydrocarbon activity and its associated wealth, boast strong financials and higher per capita income levels rivaling that of developed economies.
On the other, we have the oil importing nations such as Libya, Yemen and Syria, where frequent conflicts and geopolitical tensions, continue to disrupt the economic activity.

Blue Ocean Global Wealth: What are some of the characteristics and considerations institutional investors should be aware of when considering an allocation to Middle East and North Africa (MENA) as part of a globally diversified portfolio?
Mr. Raghu: The region is much more than “oil story” and it would be imprudent to write-off the region post the oil slump. MENA region offers exposure to some of the rapidly growing economies in the world. The outlook for growth is ably supported by continued government spending in large-scale infrastructure projects underpinned by strong balance sheets and low debt levels especially in the GCC countries.
Most countries in the GCC region boast of “twin surplus” and the possibility of external vulnerabilities remain modest as the currencies are often pegged to USD.
Historically, MENA markets have had low correlations with both developed and developing market as the factors that drive the market are different. The region also boasts of stocks that have the highest dividend yields, globally. All this argues favorably for inclusion of MENA region in a global portfolio.
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image credit: Openi
Blue Ocean Global Wealth: Can you elaborate on the research landscape in the Middle East? What type of entities are the major research providers and who do they serve?
Mr. Raghu: The oil sector remains the most understood and thoroughly researched sector in the region. Massive investments to develop social and physical infrastructure have fuelled a need for infrastructure research. Growth in services industry (financial service, telecom, trade & tourism) and increasing allocation in state budgets for development of social infrastructure such as educational & training institutions, healthcare facilities has spurred research activity in this segment. It is in this space that Marmore has positioned itself and serves the informational needs of industry consultants, big corporations and financial institutions such as World Bank and IMF.
Economic research is dominated by multilateral agencies such as IMF, IIF and World Bank; reputed policy research institutes such as Brookings, Chatham House and RAND are active in the wider MENA region. However as most of the decision-making is top-down and exercised by those in power, the scope for policy innovation by think tanks is currently meager.
Sell-side firms, who primarily cater to the retail investor, dominate equity research in the region. This is due to the substantial presence of retail investors in local markets, who dominate the trading activity and account for as much as 60-70% of the volumes.

Blue Ocean Global Wealth: Kuwait Financial Centre (Markaz) launched Marmore, its research arm, for offering strategic and financial research services, along with analysis of Middle East and North Africa (MENA) economies, markets, and firms. Can you elaborate about Marmore and its journey so far?
Mr. Raghu: Marmore MENA intelligence was established as a subsidiary of Kuwait Financial Centre“Markaz” in 2010. Over the years Marmore has enhanced its breadth and depth of its research offerings. Marmore currently provides full range of financial market, sector specific economic and policy researches.
Recently, Marmore has been catering to the specific informational and research needs of retail and institutional clients. Clients develop long-term research relationships with our firm because they value our intellectual capital and consistency.

Blue Ocean Global Wealth: What research gaps do you see in the MENA and how you see Marmore addressing those gaps?
Mr. Raghu: MENA markets are often overlooked due to limited data dissemination from the government sector, language barriers and other resource constraints. For instance, in the GCC infrastructural domain over USD 1 trillion worth of projects are expected by 2020. However research pertaining to that sector remains meager and inadequate.
Marmore with its skilled team of analysts has explored unchartered sectors that are of prime importance, such as infrastructure, with the aim of providing its clients with requisite knowledge to take informed decisions.

Blue Ocean Global Wealth: Can you explain the Marmore research process?
Mr. Raghu: Marmore research process starts with the identification of a need or problem. The problem is clearly articulated and the scope of work is established. We do a literature review to assess the current level of work done pertaining to the problem. The existing research is further expanded and new information is incorporated.
Data from a variety of sources is gathered and collated. Analysts subject the data to qualitative and quantitative analysis. Information is gleamed and the results are disseminated in the form of a research report. At Marmore, we often share the key findings to the community, at large via press releases and through various social media platforms, such as Twitter and LinkedIn.
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image credit: Marmore
Blue Ocean Global Wealth: What is Marmore’s comparative advantage over other research providers, albeit limited in number, servicing the research needs of the region?
Mr. Raghu: Marmore is the one of the few regional firms providing niche research based on strong analytics in areas that are less researched. Marmore has a consistent track record of offering quality, in-depth research. Skilled team with extensive experience in advanced quantitative and qualitative analysis techniques; deep understanding of MENA market and access to wide-ranging database adds an edge to the analysis.

Blue Ocean Global Wealth: How does Marmore leverage social media? Describe the interesting trends or patterns your team has identified.
Mr. Raghu: As Marmore develops research reports that can be purchased online, we understand the importance of investing in a robust digital presence. Social media networking sites – such as LinkedIn andTwitter (@marmoremena) – are valuable for sharing and promoting the authentic content that we regularly develop. We firmly believe in two-way communication through social media where we engage and encourage our audience to share their views. We actively post on trending topics and initiate discussions among the investor community. The social media networking sites have now become an indispensable tool for creating awareness and reaching to wider audience efficiently.

Blue Ocean Global Wealth: How can the research of Marmore support the larger national objectives of the GCC economies, like for e.g., in areas such as economic diversification strategies?
Mr. Raghu: Lack of reliable data and credible research has stymied private sector investments from taking calculated risks. Bad decisions have the ability to plague organizations. In this context, qualitative, timely and cost-effective research is necessary and much required. Our exhaustive sectorial and infrastructure research would be helpful for organizations in conceiving their market (sector/geography) entry strategies by providing a clear picture of market potential and assist institutions in identifying potential investment opportunities.
Our research has been well received by renowned international institutions to improve their understanding about MENA region.

Blue Ocean Global Wealth: Can you identify the major breakout trends that currently affect the MENA region?
Mr. Raghu: Liquidity in the regional markets is on an upswing. The recent up gradation of UAE and Qatar markets by MSCI from frontier classification to emerging status is estimated to have brought in passive inflows of USD 1bn. The largest market in the MENA region, Saudi Arabia is set to open its market for foreign investors in June, 2015 and it is widely expected to be included in MSCI Indices by 2017. Franklin Templeton estimates that the gradual transformation of key markets in the region from ‘frontier’ status to ‘emerging’ status would increase the dedicated investor base from USD 15bn to USD 550bn+.
Despite the steep fall in oil price in the second half of 2014, the GCC governments have restrained from announcing spending cuts. The Kuwaiti government recently announced its 2015-2020 development plan, which includes a number of development projects. We feel that this is a great opportunity for the research sector since such massive investments requires high quality, analytical research to be successful.
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image credit: Marmore
Blue Ocean Global Wealth: A strong ethical foundation underpins your organization. What does it mean to act ethically as a research professional or investment manager?
Mr. Raghu: As a research professional, we ensure our analysis stays objective and is based on actual data rather than opinions. We clearly distinguish between facts and opinions. Records are backed up and archived for future reference purposes. We ensure that proper citations and sources are mentioned where we do take highly valued opinions to ensure that due credit is given.
Marmore is relentlessly focused on the integrity of our research and needs of our global clientele. We maintains a Chinese wall with other Markaz departments, such as corporate finance and fund management, to avoid even the appearance of any conflicts of interests.

Interview with IIK

Qualifying oneself can make us more recognizable - 

M.R. Raghu, Senior Vice President at Kuwait Financial Centre

“There are three ingredients to a good life- learning, earning and yearning" ,an inspirational quote by the famous American journalist, novelist, poet and essayist Christopher Morley, is more than realized in the life of Mr. Raghu Mandagolathur,46,who has a CFA, FRM and is the Head of the Research Unit in MARKAZ, Kuwait. When IIK interviewed this down to earth and thoroughly practical gentleman, we found in him all these three ingredients of success. A double CFA holder which in itself is a rare achievement, Mr. Raghu’s life is an inspiration to everyone across all sections of the society.

IIK: Looking at your CV, there seems to be no looking back for you. You have grown from strength to strength, both on the academic front and on a professional front. How did you make this possible?

I wouldn’t say it was a smooth and linear growth. We all make mistakes. However, when we do make mistakes, there are two choices; either we sulk about it, or we learn from the mistakes and proceed. I have always opted for the second option and kept moving on. Most of us come from middle class families and there is no other option for the right thinking ones, but to put in hard work and stay on top. In one such effort, when I completed my ICWA alongside B.com, my parents felt proud and happy.

IIK: Looking at your job profile you are always seen on the top rung of the corporate ladder. Could you tell us more about this trait in you to stay on top in your profession as well?

Early on in my career at 23, I was able to get a good job in a public sector organization called MECON as an Assistant Accounts officer. When I took up that position, I was surprised to note that people who reported to me were well experienced people and senior in age to me. It was then that I realized the worth of professional education and the respect it demands. That made me realize that if a professional educational qualification can differentiate so much in a public sector; imagine its worth in the private sector. This was an eye opener for me. From there on, I moved onto another giant public sector company called the UTI. Here I was appointed as an Internal Auditor and this was a thankless job because I was supposed to find mistakes in everything that took place. But I wanted to do a frontline job. Hence, I pursued and completed the Indian CFA program.Though my marriage took place because I was an employee of a public sector undertaking (you know the comfort zone and safety factor is high in here) ,as soon as I completed my CFA I resigned from UTI and took up a job in an institute called the ICFAI located in Hyderabad. That was a game changer for me. I'd joined the institute as a normal analyst but thanks to opportunity given, I rose to the position as the head of an independent unit in the institute called the Securities Research Center. I was instrumental in recruiting about 30 full time analysts and more importantly, I interviewed and recruited more an 200 management graduates as summer trainees from premier IIMs in India for Equity research program. I personally cherry picked them and offered them a job profile that they could not refuse. They came to our institute instead of going to other major industries. This is one of my most cherished moments in my life. I trained them for one week in Hyderabad on Equity research and then packed them off to various industries across India to interact with the management of those companies, then come back to Hyderabad and write a report,submit it and go. I consider recruiting such high profile management graduates and training them, a real honor.

IIK: How did the call to Middle East interest you? How did you plan your growth here in Middle East?

I shifted my job location from an institute in Hyderabad to a small consultancy firm also in Hyderabad. Very soon, I realized that this was not my cup of tea and I started looking for placements elsewhere. At this time I had applied for jobs in Saudi Arabia. So I went to Riyadh in 1998 upon being selected to work for a firm there. Though from outside it looked extremely remunerative, when I went to work there, I found it to be suffocating to work in due to social conditions. I started researching listed stocks in the Saudi Stock Exchange. I made full use of Information technology to make a complete data base for all the listed Saudi companies. I realized the huge commercial potential of these information as a package. It was a huge success commercially for the firm. At the same time I also found out that the educational qualification we picked up in India was not enough in the overseas market. This was an international market and people tended to look more towards the West than the East. Hence, qualifications oriented towards the Western markets carried more value. So, an MBA from Harvard or a CFA from America carried much higher value than a ICWA from India. This learning experience was a setback for me. So instead of living in the past glory, I ventured to do my CFA from America. Once I finished this program, life for me changed completely.

IIK: How did you come to Kuwait?

While I was in Saudi, I got an invitation from a startup venture in Bahrain. I had to think hard because I would be leaving a well-established firm and then joining a firm which was just beginning. But then Bahrain as a country had its own charm and secondly I could put my CFA skills to use. So these two factors made me go to Bahrain and join the new venture. Here I was in a position advising the high networth clients of Saudi Arabia. Many of them were billionaires and they had investments across the world. My task was to list out their investment and guide them to re arrange their portfolio, suggesting diversified investment and following up on these investments. This was a good experience for me. I then had to leave Bahrain because I got this fantastic opportunity with the Kuwait based Markaz in 2006. It was a frontline position in an established company in Kuwait. Markaz needed somebody to head their research unit. The reception was warm and friendly by Markaz. And I am still here with Markaz, enjoying my stay.

IIK: Could you please tell us about CFA Societies you have started in Bahrain and in Kuwait?

When I was working in Bahrain, I happened to meet many CFAs from India. So, I thought of forming a local chapter after obtaining permission from the CFA Institute. It was a huge success as it enabled networking among the CFA community. Once I settled in my job, I repeated the feat here in Kuwait as well, that is home to more than 100 CFA's belonging to various nationalities, though majority of them were Indian. In our regular meetings, we have senior professionals of various companies come and deliver key note speeches. We conduct career based events for our members and have interactive seminars amongst ourselves. This helps in our jobs as well and also helps us see where job opportunities occur. Active exchange of ideas takes place here. We advise people who wish to take up CFA and take up issues with the CFA institute from case to case. We also conduct mock exams in a University for aspirants of CFA.

IIK: You did your B.Com in the year 1986. In this period in India, the two major fields students opted for were either medical or engineering. So how did you choose this field?

When I'd completed my tenth as a school topper, the trend then, was that brilliant students entered the science stream and the not so brilliant, into commerce. But I opted for Commerce since I had no interest in science, much to the surprise of the Principal of the school. My father told the principal ,“I want my son to do what he likes” and that is how my journ



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