The Middle East looks set to be the next key area of fund investment for Kredietbank Luxembourg (KBL) who has approached several fund managers to set up a special equity fund on its behalf.

Flemings in Luxembourg is currently moving" on the set up of an open-ended equity fund which will invest in Egypt, Jordan, Israel, Lebanon and the Emirates. And, according to Ah-mett Eren, head of fund management at KBL, GT Global are also actively considering managing a portion of the as-sets which will form part of a fund of funds structure set up for KBL's clients.

"It's going to be a great concept", says Eren. "Probably the Palestine situation will be regularised, something is going to come up from there, and Egypt is booming already."

Currently, the only open-ended fund which invests in the Middle East is run by Alliance Capital. But Eren is looking to diversify the risk. "We need at least two more products to put $20m in that region. So I can split six, six, six, something like that," he says.

Templeton, who was approached by KBL, but turned them down as its current preference is for a closed-end vehicle, is in the process of opening up a Dubai research office to learn more about the region, but are not promising any funds as yet.

"One of the reasons we haven't done a Middle East fund is simply the quantity of opportunity there to invest in is so small," says John Goldsbrough, European sales manager at Templeton. "I think it would be difficult for us to properly justify a specific fund for that area.""