Setting records has become a daily event in the Gulf states. The
world’s tallest building is under construction in Dubai, which also
boasts the largest collection of man-made islands and, soon, the
world’s biggest airport.
Abu Dhabi boasts the world’s biggest aluminum smelter and Oman
the world’s largest car showroom.
Saudi Arabia has built the biggest water project. Not wishing to
be left out, Kuwait has the biggest kite (42m x 25m) and Bahrain
lays claim to having the largest flag (169.5m x 97.1m)
This month saw the biggest potential bid from a Middle East
investor for a foreign company with Qatar’s proposed £10.6bn
($22bn) offer for
Sainsbury’s. Long cash
rich, the Gulf Arabs are fast becoming among the world’s most
sophisticated investors.
Collectively, the
Gulf Co-operation Council
countries, which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia
and the United Arab Emirates, control foreign assets worth $1.6
trillion, 225% of their gross domestic product, according to the
Institute of International
Finance.
The largest funds, including the
Kuwait Investment
Authority and the
Abu Dhabi Investment
Authority, were founded in the 1970s to provide
financial stability when the price of oil fluctuated. They invested
their assets conservatively and were generally risk averse.
As these funds grew to hundreds of billions of dollars, they
found that even when oil slumped to $25 a barrel, an increasingly
smaller portion of their assets were necessary to ensure economic
stability.
So, led by Abu Dhabi, these funds plowed surplus cash into
higher risk investment strategies designed to achieve superior
returns.
Several of the multi-billion dollar sovereign wealth funds in
the Gulf are understood to be modelling their portfolios on the
investments of successful US university endowment funds, such as
Harvard and
Yale, which have a large part of their assets in private
equity, real estate and hedge funds.
The Abu Dhabi Investment Authority is the largest fund in the
region with an estimated $600bn, although several people believe
that to be conservative.
The fund is run by Frenchman
Jean-Paul Villain, who
previously worked in
BNP Paribas’ asset management division. Sources close to
Adia said it has been hiring aggressively and resembles
a world-class manager.
“When we visit Adia it feels like a big investment house. A lot
of the people they’ve hired have strong backgrounds in proprietary
trading and fund management. They’ve got a full range of
alternatives and asset classes,” said one source.
Several of the funds are pushing into new investments in real
estate, infrastructure projects, private equity and hedge funds.
Istithmar, the Dubai investment fund, bought a 3% stake
in London-hedge fund
GLG Partners in June.
These diversification programs are typically funded by reducing
their exposure to traditional fixed income and bank deposits, the
majority of which are in US dollars.
Some in the region caution this could lead to further downward
pressure on the dollar.
Simon Williams, Middle
East economist at
HSBC in Dubai, disagrees.
He said: “I don’t see the Gulf deserting the US dollar, although
there are concerns at the moment. However, investors in the region
are playing a long-term game. When you have funds this large to
invest there is only a limited number of places which can absorb
that liquidity.”
As their assets grow they are likely to invest more of the new
flows outside the US.
Kuwait’s removal of its peg to the US dollar in May also
suggests a declining importance of the dollar in the region.
Others argue that the funds have long pursued diversification
away from the dollar with an emphasis on global bond investments,
which are unhedged.
Finding out exact numbers for many of the funds can be
difficult, as most do not disclose their value.
1 Abu Dhabi Investment Authority
Abu Dhabi, United Arab Emirates
Managing Director
Sheikh Ahmad Bin Zayed Al
Nahyan (Sheikh Khalifa Bin Zayed Al Nahyan, ruler of
UAE, chairs the Abu Dhabi Investment Council)
Est AuM $600bn to $1 trillion
Sitting on nearly 10% of the world’s oil reserves, Abu Dhabi is
regarded by its peers as the godfather of investment funds and
eclipses the other Gulf states to top the list to be the biggest
investor in the region. The funds involved are so large that the
emirate has formed two state investment bodies to manage its wealth
and diversify its oil revenues internationally into other
sectors.
The Abu Dhabi Investment Authority is the older of the two
bodies, founded in 1976. Adia’s size, of about $600bn, has been
achieved thanks to a trebling of oil prices since 2003, as well as
other investment returns.
Adia’s portfolio has returned 10% per year on average, according
to trade paper
Euromoney. Last year its asset allocation was split
roughly 50% to 60% in equities, 20% to 25% in fixed income, 5% to
8% in real estate, 5% to 10% in private equity, an area it has been
investing in since 1992, and 5% to 10% in alternatives, according
to Euromoney.
One way it is expanding is through backing ambitious and
diversified financial services businesses, taking minority
positions. In May, Adia took an 8% stake in Egypt-based
EFG-Hermes, which covers the Gulf region. Adia is also
preparing to invest an estimated $800m in buying less than 10% of
Leon Black’s alternative investment firm Apollo after acquiring a
15% to 20% holding in debt manager Ares for less than $400m.
Adia also invested about $600m in Apollo’s Euronext-listed fund
last year, which was less than a third of the total raised.
Adia’s investment is seen by rivals as a stamp of approval for
these businesses and it is viewed, even by its rivals, as one of
the most sophisticated investors in the region. As
Hassan Heikal, co-chairman
and chief executive of EFG-Hermes, said: “Adia is a leading force
and authority across the region. Their investment highlights the
confidence the market has in
EFG-Hermes and is invaluable to our plans to innovate and
evolve.”
Adia’s international focus and size mean it is more prominent
than the second body, the Abu Dhabi Investment Council, which was
set up more recently to make investments inside the United Arab
Emirates. The Abu Dhabi Investment Council also took over ownership
of local banks previously held by Adia and is expected to set up
global private equity programmes.
2
Sama
Riyadh, Kingdom of Saudi Arabia
Governor
Hamad Al-Sayari
Est AuM $250bn
Details about the Saudi Arabian Monetary Agency are hard to come
by but investors and analysts believe its wealth is such that it
comes in as the second largest fund in the Middle East. Sama, which
was established in 1952, is responsible for the management of the
country’s foreign exchange reserves and also acts as a banker to
the Government, supervises commercial banks and is in charge of
monetary policy to promote price and exchange rate stability.
Although being ranked second in terms of pools of assets in the
Gulf region, it is not regarded in the same way as other sovereign
wealth funds. The fund manages some of its assets internally,
mainly in fixed income, but outsources its equity portfolios to
third-party managers. Sources said it is in a similar position to
the Kuwait Investment Authority in terms of its diversification
plans.
3 Kuwait Investment Authority
Kuwait City, Kuwait
CEO
Bader M Al Sa’ad
Estimated AuM $215bn
The Kuwait fund has two parts; the General Reserve Fund, which
is the main treasurer for the government that receives all
revenues, and the Future Generations Fund, which was set up in 1976
by transferring half of the reserve fund’s wealth at the time.
The future fund was set up to provide support to Kuwaitis when
oil reserves start to decline. Each year, 10% of state revenues are
transferred to the fund. Assets cannot be withdrawn from the fund,
unless sanctioned by law.
The future fund is the larger of the two and is understood to
have grown by about 30% last year, including the 10% annual cash
injection. The general fund is understood to be more conservatively
invested as its goal is to preserve capital, rather than grow
it.
The future fund allocates assets for investment in countries in
proportion to their gross domestic product, although in some
situations the weighting is skewed, thanks to a 1.7% stake in UK
oil group
BP and 6.9% of German carmaker
DaimlerChrysler.
Management of the future fund is outsourced to third-party
managers. The fund, which by itself would be the third largest
sovereign wealth fund in the region, has been pursuing new
investment strategies, which will bring it more in line with the
level of sophistication of the Abu Dhabi Investment Authority.
Since 2005 when it approved a new asset allocation, the future
fund has been reducing its exposure to bonds and equities in favour
of private equity, real estate and funds of hedge funds. The new
asset allocation will enable it to double its assets in the next
decade.
The KIA has also expressed interest in taking stakes in Asian
companies. It took a HK$5.6bn (€524m) stake in the
Industrial and Commercial Bank of
China when it floated last September and is interested
in state-owned companies in Vietnam that are likely to soon be
privatised.
4
Qatar Investment
Authority
Doha, Qatar
CEO Sheikh Hamad bin Jassim bin Jaber al Thani, Prime Minister
of Qatar)
Est AuM $50bn to $70bn
Officially set up in 2005, the QIA has focused on making direct
private equity investments. It is far smaller than its neighbour
Abu Dhabi, but the fund grows by about $1bn a week, thanks to
revenues from its natural gas reserves, which are the third largest
in the world. Flows into the fund are not regulated as they are in
Kuwait, so it varies month by month. The flow of capital into the
fund could double by 2010.
The fund is understood to target a return of about 15% a year,
Sheikh Hamad told
Dow Jones Newswires this month: “If we invest in
treasuries and get 4% or 5%, inflation will eat it. We need high
returns. We need to find a way to break through the cycle of the
dollar and interest rates. We are taking the lead in investing in
new instruments.”
This month the QIA launched the largest bid from the Middle East
for a foreign company when it made a potential £10.6bn (€15.7bn)
offer to take over UK retailer,
J Sainsbury. The bid would be through
Delta Two, an investment vehicle based in London that is
run by
Paul Taylor, a former
NatWest banker. He was most recently chief executive of
Rotch Property Group,
which is headed by
Robert Tchenguiz.
It was not the authority’s first attempt to venture in to the UK
market. Last year QIA launched a bid for
Thames Water but lost to
Australia’s
Macquarie Bank. Last year
it paid £1.4bn to acquire
Four Seasons Healthcare in
the UK and in June it set its sights eastwards, acquiring a stake
in
Raffles Medical Group in Singapore, alongside
Temasek.
In the Middle East, QIA’s assets include a majority stake in
Beirut’s BLC Bank, which it bought from the Lebanese Government at
the end of 2005 for about $235m. In June it announced its intention
to sell the holding.
Other minority investments include a 8.7% stake in French media
group,
Lagardère.
5
Investcorp
Manama, Bahrain
President and CEO Nemir A Kirdar
Est AuM $10bn
With annual results due tomorrow, Investcorp is expected to
deliver another bumper set of figures. Given that it had net income
of $130m and returned a record $1.4bn to investors in the 12 months
to June 30 last year, the London and Bahrain-listed company is
looking for similar success.
Founded in 1982, Investcorp has arranged investments with a
combined value of $32bn in its four business lines: private equity
in North America and western Europe, global hedge fund offerings,
real estate investment in the US and technology investment in North
America and western Europe.
Last month Investcorp agreed to buy a roofing material maker for
€850m ($1.1bn), its fourth private equity acquisition this year.
Investcorp said it invested $537m of equity while selling four
companies, including bedmaker
Hilding Anders, to return
$1.1bn at its interim results to December 31.
As with
Arcapita, Investcorp has funded its deals from the
balance sheet and syndicated the equity to more than 1,100
investors.
However, the group is creating closed-ended
buyout funds to sit alongside its two venture capital
vehicles to provide more regular asset management fees.
Last month it made a first close of its Investcorp Private
Equity 2007 fund targeted at institutional investors outside the
Gulf region with committed capital of $620m, including $270m from
Investcorp and its affiliates.
Within hedge funds, Investcorp signed an alliance in January
with
WMG Advisors, which will manage a long-short equity
fund, and the New York-based real estate team has acquired 200
properties, totalling $6bn, and has $3bn of property under
management.
6 State General Reserve Fund
Muscat, Oman
CEO not disclosed
Est Aum $10bn
The smallest of the sovereign wealth funds in the Gulf, the
State General Reserve Fund became a well known name to bankers in
the region this year when it was rumoured to have been interested
in backing a management buyout of Dow Chemicals.
Oman’s smaller oil reserves and value of funds are likely to
have led it to adopt a more conservative investment approach for
its traditional investments. The fund manages fixed income
internally but is understood to outsource most of its equity assets
to third-party managers.
It has also participated in several real estate developments in
the region, including the Wave Seafront Resort in Oman, which cost
more than $800m. It is also involved in Heron Tower, the soon to be
built 46-storey office tower on London’s Bishopsgate, according to
Estates Gazette.
7 Istithmar
Dubai, United Arab Emirates
CEO
David Jackson
Est AuM $8bn
Dubai-based Istithmar lives up to its Arabic meaning –
investment – by spending an estimated $4bn in four years from its
foundation and is reportedly on course to buy an additional $3bn of
assets this year.
Although Istithmar concentrates on the consumer, financial, real
estate and industrial sectors, its funding and backing from the
Dubai rulers means it is global in approach and wide-ranging in its
investments.
From spending $1.2bn on a 2.7% stake in emerging markets bank
Standard Chartered to
snapping up cruise liner QE2, from investing $1.2bn in buying 280
Park Avenue, New York, to UK industrials company Inchcape Shipping
Service, the group is ambitious and wants to open offices in New
York and China.
It has recently acquired a stake in hedge funds manager GLG to
sit alongside its holding in advisory boutique
Perella Weinberg.
Istithmar sits within holding company Dubai World, which was
founded by the country’s ruler,
Sheikh Mohammed Bin Rashid Al
Maktoum, last year. Dubai World owns half of Istithmar
with the remainder held by the Corporate Office of Dubai.
Shortly after, David Jackson was promoted from chief investment
officer to chief executive to replace Muneer Tarmoom. John Amato
and Felix Herlihy were brought in as joint chief investment
officers from FIL USA, an investment vehicle of the
Agnelli family.
8
Dubai International
Capital
Dubai, United Arab Emirates
Chairman and CEO
Sameer Al Ansari
Est AuM $6bn
Dubai International Capital, the private equity investment firm
backed by the emirate’s ruling sheikh, is looking to quadruple its
$6bn under management within two years. As arguably the most
prominent of all the Gulf funds, the firm is well known to
investors in the west.
For an organisation created three years before, this speed of
development sums up the strong support given by the state through
its
Dubai Holdings vehicle
from which it manages the cashflow partly generated by its parent’s
real estate operations. To prepare for this expansion, DIC has
reorganised into four divisions. Instead of its focus on private
equity, it has added a public equities division for its minority
stakes in listed companies, such as banks ICICI and HSBC, carmaker
DaimlerChrysler and defence company
EADS; an asset management arm; and emerging markets to
cover the Middle East, North Africa, Asia, eastern Europe and Latin
America.
Sameer Al Ansari, chairman and chief executive of DIC, said the
private equity division managed $4.5bn to $5bn, excluding a
remaining 20% stake in leisure group operator
Tussauds Group, and this
was expected to reach $10bn in two years.
The global, public equities division would be managing $10bn
within two years while emerging markets would invest another $5bn
in order for the group to hit its target $25bn under
management.
In private equity, the firm has primarily invested in secondary
buyouts, including the £800m purchase of Tussauds; the £700m deal
for aircraft engines maker
Doncasters and $492m to bolt on FastenTech; its purchase
of budget hotel chain
Travelodge for £675m; and Mauser, a German packaging
group it bought in April for €850m.
DIC wants to break into other geographical markets from its
London and Dubai bases. Al Ansari also flagged North America and
Asia, where it expects to open offices and work with partners, such
as ICICI, which also has a private equity division. Al Ansari said:
“It is an understood objective for DIC to be an ambassador for
Dubai in the way we operate.”
But being an ambassador does not mean paying over the odds for
businesses. Despite being a keen fan of
Liverpool Football Club,
Al Ansari backed away from a deal after the price was raised and
the team was sold to US sports investors George Gillett and
Tom Hicks, co-founder of buyout group
Hicks Muse Tate &
Furst.
9
Abraaj Capital
Dubai, United Arab Emirates
CEO Arif Masood Naqvi
AuM $4bn
The team conducted the first leveraged buyout in the region in
1999 of Inchcape Middle East in a transaction worth $100m.
Its gross capital gain on the investment was 16.3 times equity
on exited investments over a three year period. It also bought and
sold Aramex International, a freight and express-delivery company,
and was involved in the privatisation of Jordan Aircraft
Maintenance Company.
It also owns a large stake in Spinneys, which is one of the
largest supermarket chains in the Middle East.
Abraaj also has a controlling stake in internet portal,
Maktoob.com. It employs 110 specialists.
10 Arcapita
Manama, Bahrain
CEO
Atif Abdulmalik
Est AuM $3.8bn
Widely regarded as the young upstart to local rival Investcorp
from which it sprung, Arcapita has proved its banking model of
buying assets using its balance sheet then syndicating the equity
on to its 1,000 or so clients in the Gulf region.
Arcapita made a record annualised net income of $190.5m for the
year to June 30 2006, up 83% from the 12 months of 2005.
Based in Bahrain, with offices in Atlanta, London and Singapore,
Arcapita has $3.8bn on its balance sheet and paid-in capital of
$225m, of which 81% is held by more than 233 individuals and
institutions. The remainder is held by Arcapita’s management.
Arcapita has completed deals of nearly $19bn in its four
business lines – corporate investment, real estate investment,
asset-based investment and venture capital. Its three largest
purchases and 80% of its total have taken place in the past 18
months, including the $4.2bn acquisition of
Viridian Group, the
Northern Ireland electricity utility, completed last year.
Atif Abdulmalik, chief executive of Arcapita, said: “Each of our
four business lines has made significant contributions to the
results for fiscal 2007, highlighting the strength of Arcapita’s
diversified business model, and we completed five exits, returning
over half a billion dollars to investors.”
The announced sales include Roxar, Arcapita’s first deal in the
Nordic region, which CorrOcean agreed to buy for $370m in June.
Others argue that the funds have long pursued diversification
away from the dollar with an emphasis on global bond investments,
which are unhedged.
Finding out exact numbers for many of the funds can be
difficult, as most do not disclose their value.
http://www.financialnews-us.com/?page=ushome&contentid=2348431254
u r a
quack!!!!!
tok
kork onli!!!
