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February 26, 2024

Funding Growth – Chairman & CEO Ahmed Farid talks to CEO Middle East

Ahmed Farid, the Chairman and CEO of Lakemore Partners, is far from your typical finance expert. Backed by 35 years of experience in investment management and treasury across the globe, Farid is at the forefront of a transformative movement that aims to reshape the future of regional markets.

In a candid conversation with CEO Middle East, Farid delves into his journey, the origins of Lakemore Partners, its role in introducing Collateralised Loan Obligation (CLO) equities, and plans for further growth and innovation.

Unveiling a vision

Established in 2016, Lakemore Partners experienced rapid growth, spearheaded by Farid’s vision. With a team of 33 professionals spanning key financial hubs such as London, the US, Dubai, and Zurich, the company has made significant strides in the world of private credit.
In 2017, Lakemore Partners raised its first fund and is now working towards launching the sixth fund, reflecting their success and increasing investor confidence. Farid highlights the closure of fund five at $560m.

“I would actually argue that we have been able to deliver equity returns for debt risk,” he says.

Pioneering CLO equities

The idea to introduce CLO equities to regional markets arose from the need for stability in a volatile financial landscape. While the CLO market remains predominantly US-centric, Farid and his team recognised the potential to bring this asset class to the region.

“The CLO market is still predominantly a US market. It has not really developed in the region yet and that’s when our idea started,” he says.

With experience in investment management and treasury, coupled with a desire to reduce exposure to market volatility, Lakemore Partners conducted rigorous experimentation and found CLO equities to be the ideal solution. They tested, invested, and built a track record over time, showcasing the benefits and potential of this relatively complex asset class.

Introducing a new and complex asset class to the region presented a challenge: Educating the investor base. Farid recognised the importance of educating investors about the benefits and intricacies of CLO equities.

The firm invested time and effort into this educational process, leveraging their first-mover advantage and practical track record to build confidence in the market. By clarifying CLO equities and highlighting their potential for high risk-adjusted returns, Lakemore Partners played a crucial role in driving demand and solidifying their position as a leader in the market.

“I think the demand was driven mainly by people’s appetite into investing in an asset class that de-risks their exposure to the conventional equity markets. As you know equity markets are quite volatile, if you move away from the equity market, then you get into the most stable part of the debt market which is the high investment grade and that does not offer an attractive return,” Farid explains.

“So, the best risk adjusted returns are presented in the CLO equity market and I think that’s really what drove the demand for it,” he adds.

Meeting demand in economic downturns

In times of economic downturns, investors often seek stable alternatives to the inherently volatile equity markets. CLO equities have emerged as an attractive option, providing risk-adjusted returns that are not easily found in other asset classes. Lakemore Partners’ focus on counter-cyclical investments has positioned the organisaion as an partner of institutional investors during challenging economic periods.

“We will not operate in markets that we do not understand. We have built our expertise and track record on the US credit markets. We will continue to do that. The credit market is a huge market, it is much bigger than the equity market and therefore, we may find some other opportunities within that credit market that we can expand to in the future,” Farid explains.

Journey of growth and global footprint

The CEO’s journey with Lakemore Partners’ began with friends and family investments, gradually expanding to high-net-worth individuals. However, a significant shift occurred when 90 percent of their investor base transitioned to institutional investors.

This transition has allowed the company to become a well-known feeder of the CLO asset class into the professional market, expanding its reach and influence. Looking ahead, Farid envisions further growth within the GCC market, recognising the immense potential in the credit market.

With ambitious megaprojects demanding alternative means of funding, the company aims to work with local strategic partners to replicate its model in the region, filling the gap left by traditional banks to provide a new avenue for capital and accelerate growth in Saudi and the GCC.

Sharia compliance and regional appeal

Incorporating Sharia compliance in its operations proven to be appealing to both regional high-net-worth clients and Western investors. Offering Sharia-compliant structures, Farid believes, leads to an opening for a broader audience, expanding the firm’s client base.

Lakemore Partners ensures that all its funds align with these principles, adapting Sharia-compliant structures to the CLO market. This approach has allowed the company to cater to the unique needs of regional investors while maintaining their commitment to ethical investment practices.

Distinctive strategy and supermajority control

With the adoption of a distinctive CLO strategy, combined with a supermajority control approach, Farid says that this resonates strongly with institutional investors. Differentiating themselves from passive investors, the company assumes a proactive role in structuring investments, developing strategies, overseeing exits, and diversifying portfolios. This hands-on approach aims to build confidence in investors

Lakemore Partners aims to continue expanding its client base by diligently educating investors about the benefits and intricacies of the CLO asset class. Recognising the untapped potential in the market, the company believes that there is significant room for growth and aims to capitalise on this opportunity.

Offering a glimpse into the future, Farid details plans to adapt its technology to the GCC market to further develop the CLO asset class and cater to the unique needs of regional investors.
By leveraging technology and innovation, this move intends to enhance the accessibility and efficiency of investing in CLO equities, contributing to the growth and maturity of the regional market.

Navigating volatile economic environments

Lakemore Partners’ success in navigating through volatile economic environments can be attributed to their disciplined approach to risk management and their focus on counter-cyclical investments. By investing in CLO equities, which are backed by diversified portfolio of senior secured loans, the company is able to mitigate risks and generate stable returns even when traditional equity markets experience downturns. This ability to provide stability and consistent performance has been a key driver in attracting institutional investors.

Farid remains confident in the GCC investor market and foresees growth and opportunities in the region’s financial markets. He believes Lakemore Partners will continue to revolutionise the future of regional markets through their innovative approach to private credit and the expansion of the CLO asset class.

Farid continues to embody a pioneering role with the aim to reshape the future of regional markets through the introduction of CLO equities. With a focus on stability, attractive risk-adjusted returns, and ethical investment practices, Lakemore Partners aims to position itself as a partner of choice for institutional investors. As the firm continue to expand their client base, educate investors, and adapt to the unique needs of the GCC market, Farid asserts that he remains committed to driving growth, innovation, and positive change in the world of finance.