The latest ETF launch from Abu Dhabi headquartered Lunate is the 20th ETF for the firm which is an independent global investment firm with more than USD110 billion in AUM, having started operations on 1 January 2024.
Lunate was founded by three Managing Partners: Khalifa Al Suwaidi, Murtaza Hussain and Seif Fikry, who brought together employees, capital and expertise from three other investment firms in Abu Dhabi. Chimera Investment is the majority shareholder in Lunate, alongside the three Managing Partners.
The firm has a core focus on private markets but has also expanded into adjacent business areas including offering investors a range of conventional and thematic ETFs, through its public markets offering.
Sherif Salem, Partner & Head of Public Markets at Lunate, explains that he has been at the firm since 2019, at Chimera Capital, where the ETF story started.
“The strategy and goal is to build up the ETF industry here,” Salem says, which in this instance meant literally from the ground, supporting the regulators as they created the frameworks to launch ETFs.
“It had never been done onshore before in the UAE, in a US or European structure, so we had to go through the regulation for ETFs and we also submitted for a UCITS structure as it is more widely known.”
The firm now has two umbrella structures that enables them to launch funds of all types.
“Our strategy was to first introduce so-called plain vanilla passive ETFs on markets that people are familiar with,” Salem says.
The funds have been launched on the Abu Dhabi Securities Exchange (ADX) and on the Dubai Financial Market (DFM).
The funds provide exposure to global emerging markets such as China, India, Turkey and Pakistan as well as developed markets such as the US, Japan and Germany.
They have also launched two conventional fixed income ETFs, with one Shariah-compliant sukuk fund.
The latest launch of the Boreas S&P AI Data, Power & Infrastructure UCITS ETF is part of the new phase of launching thematic ETFs.
“While building the ETFs we are also actively trying to build out the ecosystem,” Salem says. “There were no brokers here who were familiar with the role of authorised participants so we brought in authorised participants from local and regional brokers who have been actively market making.”
The first international firm that was signed on as an authorised participant is HSBC which has now launched a market making function for the UAE out of London.
The firm’s first ETF, through Chimera Capital, was listed in July 2020. Since then, the total assets under management within Lunate’s ETFs has grown to USD250 million, making them the largest ETF issuer in the MENA region.
Saudi Arabia lays claim to the largest ETF business in the region with USD2.5 billion in assets.
“We see ETFs, as the whole world does, the huge inflow of money and interest into ETFs. It’s the investment of choice for millions of people. It took a lot of work with the regulators to introduce something that they had never had to regulate before. Perhaps it is something that others may not have wanted to do the work around, but if you look at it now, those that are in the market invest in ETFs.
“It also plays into the Abu Dhabi vision of becoming a financial centre and diversifying the financial instruments that are available. You can see that ADX has introduced derivatives and for our part we have introduced the ETFs.
“ETFs are something that people didn’t know they wanted. However, once they saw more, we have seen more interest. It’s been quite a ride in terms of the level of interest and participation.”
The investor base at first was mostly institutional but retail has now started to grow, particularly with the signing of an agreement with WIO Bank which has the WIO Invest platform providing investors with access to ETFs from the US and the UAE markets.
“Our ETFs are highlighted on their app and it is set up so that clients are saving through savings plans,” Salem says. “We have seen a sustained interest and trading in our ETFs with small amounts which points to retail investors.”
The firm works with Northwind as an adviser on the thematic product development, a firm that is majority owned by Lunate, with a team led by Geir Espeskog and Christopher Vass that are a specialist team of thematic ETF experts.
“They are providing the expertise and structuring of the thematic products which are not quite as straightforward as structuring equity and fixed income ETFs,” Salem says.
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