Egypt’s investment funds have crossed half a trillion pounds and eight in ten fund units belong to individual savers. But on the same day that snapshot was published, a broad selloff forced the exchange to halt trading for half an hour. Joining us again is Dr. Reem Essam Bedeir, Associate Professor of Accounting at Wilkes University’s Sidhu School of Business. Thank you for joining us, Doctor Reem.
Thank you for having me today.
When trading stops on certain stocks, what price does a fund put on them — and are Egypt’s rules on that as clear as the US’s?
We cannot say there is no price when trading stops. Price and valuation have models and rules to follow. According to IFRS 13 and US GAAP 820 — the standards for fair value evaluation — we have three levels of evaluation. When ambiguity is high and the price is not clear, we cannot just use the historical or last transaction price. We use comparable securities or the third level of evaluation. The most important points are consistency in the evaluation method and transparency.
Eight in ten fund units belong to individual savers. If many redeem at once after a day like this, those who stay pay the price. What should investors check before that happens?
This is usually a liquidity risk. If many investors want to redeem at the same time and the fund does not have enough liquidity to pay back their money, the fund faces liquidity risk and may have to sell at a bad price. As an investor, I advise focusing on three things: read the redemption conditions very carefully — the fund may have redemption barriers or limits. Look at how liquid the portfolio is. And make sure your portfolio is fairly diversified across different types of investments to manage that liquidity limit.
At mid-year, about two thirds of fund money was in money market funds. Is that a cushion or a sign that Egyptians are using funds as bank deposits?
Both. Money market funds have high liquidity and short-term access — you can invest, make a profit, and exit whenever you want without limitation. But at the same time, some Egyptian investors invest in money markets for two reasons: as an entry point to the stock market, or as a form of saving — like a bank deposit. They make a short-term profit and it is easy to exit.
The FRA allowed one auditor to review five funds at once instead of three. Is audit capacity keeping up?
I am optimistic. Increasing the number of funds per auditor does not necessarily affect quality — it depends on the expertise of the auditor and the tools and procedures they use. As an investor, focus on the auditor’s qualifications and read the audit opinion and disclosure carefully. I trust the quality and strict regulations of the central bank in Egypt.
The FRA is testing a blockchain-based money market fund. Does instant redemption protect investors or speed up a run?
I support using blockchain technology in investing — it enables instant transactions and a high level of transparency, which is exactly what investors are looking for. The risk is not the technology — the risk is whether the fund itself is ready to provide liquidity at a good price. The fund needs to hold highly liquid assets so that if this situation repeats, it can pay back investors without waiting for prices to fall too low.
Your insights came at exactly the right time. Thank you very much for joining us.
Thank you for having me today.
