Sico Capital’s regional funds had a standout 2025, successfully navigating a rare period of “decoupling” where the Saudi market underperformed its GCC peers for the first time in nearly a decade. While TASI faced a “warranted correction” in 2025 — dropping some 13% — Sico’s funds leveraged active stock picking and geographic diversification to deliver significant alpha for investors.

We sat down with Nishit Lakhotia, chief investment officer at Sico BSC; Shakeel Sarwar, head of asset management at Sico Bank; Hashem AlSada, head of asset management at Sico Capital; and Fatema Al Doseri, portfolio manager at Sico BSC, to discuss the year.

How we fared against regional counterparts: Most Gulf stock markets closed 2025 higher, led by Dubai (+17.2%) and Abu Dhabi (+6.1%), supported by strong fundamentals and corporate earnings. Qatar, Oman, Kuwait, and Bahrain also ended the year in the green. Further from home, Egypt outperformed the region, with its benchmark EGX30 up 40% last year.

We’re not used to this: “2025 was the first year after over a decade in which the Saudi market underperformed the other GCC markets,” Sarwar noted. “The Saudi market was one of the few markets in the world with negative returns.”

Sico’s Gulf Equity Fund delivered 15% gross returns, putting it among the region’s top performers for the year, driven by a strategic shift into non-Saudi markets. “The ex-Saudi space did exceptionally well, and our returns reflect that divergence,” Sarwar said. Lakhotia added that while Saudi equities lagged, other GCC markets offered stronger prospects, with growth in the UAE backed by real estate and financials, momentum in Kuwait’s mortgage market, improved liquidity in Oman, and Qatar’s LNG expansion.

Behind the TASI pullback

It was a necessary correction: The market slump reflected a “warranted correction” after stretched valuations, with the TASI entering 2025 trading at nearly 20x earnings — making it among the priciest across emerging markets, Sarwar said. According to AlSada, these elevated multiples drove a “rotation,” as asset managers locked in gains on overvalued names and redeployed capital across more attractive GCC prospects.

What dampened the market: Heavy concentration — around 60% — in financials and petrochemicals amplified the decline as banks faced liquidity pressures and net interest margin compression, while petrochemicals were hit by global oversupply and rising domestic fuel costs. Lakhotia added that the government’s reprioritization of major project spending — previously “steroids to the market” — further cooled investor sentiment. The pullback extended to high-growth sectors such as healthcare and consumer, where sharp de-ratings followed as lofty valuations met softer earnings and evolving regulations.

Navigating the correction

The Sico Kingdom Equity Fund outperformed the Saudi benchmark by 9% last year through replacing broad sector wagers with a disciplined, research-driven “stock-picking” strategy. AlSada explained that the fund maintained a bottom-up approach, targeting “banks that are going to benefit in an interest declining environment” and real estate firms resilient to recent regulatory shifts. By staying close to specific company convictions, the fund managed to hedge effectively against the broader market slump.

A conservative, capital-first approach: Al Doseri and Sarwar credited the fund’s resilience to a philosophy prioritizing capital protection over chasing lofty market highs. Staying underweight in expensive names like Acwa Power — which fell 50% during the year — and Aramco, the fund instead backed high-conviction prospects like ins. fintech aggregator Rasan, delivering strong performance. “We are not great when the markets are ecstatic […] but in difficult markets, we have time and again proved that we come out very strong,” Sarwar said.

Sico was also selective with its IPOs — subscribing to only one of several offerings that hit the market over the past year.

Catalysts on the horizon

Foreign ownership limit in focus: Despite lingering liquidity pressures, Lakhotia points to easing the foreign ownership limit as the most immediate catalyst, shifting the market away from strict QFI requirements and opening access to smaller global institutions to invest directly.

Sarwar frames the reform as a structural shift: While it may not drive immediate large-scale inflows, it should steadily improve liquidity by making it easier for a broader pool of investors to enter and exit the market. Sarwar cautions, however, that the move is “two-pronged” — reinforcing Saudi Arabia’s global investment appeal, but also increasing exposure to “hot money” and, in turn, market volatility.

Sico sees end of “irrational exuberance” for IPOs: The era of viewing every IPO as “free money” is over, said Lakhotia. After multiple listing failures in 2025 due to aggressive valuations, he stressed that success this year hinges on pricing pragmatism, noting that IPOs will perform if sellers are “willing to leave something on the table for investors.” Sarwar added that companies can no longer “throw an IPO at any price” and expect that demand will follow, as the market has realigned with broader fundamentals.

Tags: