Home / Markets
Monday, August 11, 2008
Dubai Mercantile Investors Include Goldman, Morgan Stanley
Associated Press
DUBAI, United Arab Emirates -- Goldman Sachs Group Inc. (GS), Morgan Stanley (MS) and four energy-related companies are taking minority stakes in Dubai Mercantile Exchange Ltd., adding clout to the fledgling exchange as it seeks to establish itself as a major player in the global crude oil market.
The exchange said Monday that the new investors, which also include a division of Royal Dutch Shell PLC and energy trading companies Vitol, Concord Energy Pte Ltd. and Casa Energy Trading, bought their stakes after the exchange's board approved a 20% sale.
Financial terms of the deal and the size of the investors' stakes were not disclosed. The exchange did not confirm whether the buyers' investments constituted the entire 20 percent up for sale.
"The deal gives us access to some of the best minds in the world in the commodities sector," DME Chairman Ahmad Sharaf said in a briefing with reporters. "Today's announcement ... is a testament to our success to date and offers huge promise for the future."
Launched in May 2007 by New York Mercantile Exchange operator Nymex Holdings Inc. and state-controlled companies in Dubai and Oman, the DME was initially established to trade a futures contract for Middle East sour crude oil. The contract, benchmarked to oil from Oman, competes against a similar contract traded on the U.S.-based IntercontinentalExchange.
Both contracts are meant to provide a market for the high-sulfur oil, which requires more processing than the benchmark light, sweet crudes traded in longer-established markets in New York and London.
Since its inception, the DME has struggled to attract even a fraction of the business generated by larger crude markets such as the Nymex. Executives said Monday's deal does not include promises of new trading business.
Olivier Jakob, an analyst at trading advisory firm Petromatrix in Switzerland, said the deal could signal an effort by the exchange to attract speculators into the market and make the sour crude contract easier to buy and sell.
"For now, it's being used for the physical delivery, but it's failing to attract the liquidity from speculators," Jakob said.
Nymex, Dubai government development company Tatweer and state-run Oman Investment Fund will each hold a 25 percent stake in the exchange following the sale, DME executives said. Another 5 percent will continue to be held by floor traders.
Georges Makhoul, president of Morgan Stanley's Middle East business, said in a statement that the Dubai exchange "not only offers strong potential from an investment perspective, but also constitutes a strategic partnership that will develop our footprint in the Middle East."
Dubai, one of seven semiautonomous sheikdoms that comprise the United Arab Emirates, has fashioned itself into the Middle East's leading business center in recent years. The emirate's government-owned stock exchange operator, Borse Dubai, last year acquired sizable minority stakes in Nasdaq OMX Group Inc. and the London Stock Exchange.
Dubai today generates only a small fraction of its income from oil. However, the UAE as a whole -- while smaller than the U.S. state of Maine -- is the world's third-largest oil exporter.
FOX Translator
No data currently available.
No data currently available.
Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
