The MENASA-focused firm has cut its buyout fund's target in half, citing a difficult fundraising environment and changed deal landscape. Its annual report disclosed LPs were allowed to reduce existing commitments - a move several mega-funds have made.
Abraaj Capital has said it will “right size” the target for Abraaj Buyout Fund IV (ABOF IV) to “closer to” $2 billion, down from its original $4 billion target.
The fund had seen a first close on $2.6 billion in the fourth quarter of 2008.
Abraaj, in its annual report, cited a “tight” fundraising environment, a decrease in the average transaction size owing to lower asset prices and its present focus on portfolio management rather than new investments as the three factors that led to a reduction in the fund's target.
The fund will see a final close in 2010, the firm added.
In light of the “extremely challenging” fundraising environment, the firm allowed a number of its limited partners to cut their commitments to the fund through the course of 2009, Abraaj said. TPG, Permira, Sun Capital, Candover and Permira are among the firms to have offered similar reductions to LPs.
In terms of portfolio performance, Abraaj said most of its companies had continued on their growth trajectory in 2009. This performance was generally driven by favourable macroeconomic conditions in the MENASA region as well as the non-cyclical nature of the majority of its portfolio of investments, it said.
Since inception in 2002, the Dubai-headquartered firm has made more than 36 investments in 11 countries and has recorded 21 exits. In addition to Fund IV, Abraaj also manages three other fully private equity funds that are now fully deployed and a real estate fund that is fully invested as well.
The firm is also currently targeting between $250 million and $500 million for ASAS, a structured vehicle that will target long-term rental yields from operational real estate assets in under-supplied sectors.
In November 2009, Abraaj acquired Riyada Ventures, a Jordan-based, MENA-focused venture capital firm. The acquisition of Riyada marked Abraaj’s foray in the small and medium enterprise category of funds. Under the new initiative, Abraaj will invest in small and medium-sized enterprises (SME) across the Middle East and North Africa.
In January this year, the firm entered into a partnership with the Palestine Investment Fund to raise a $50 million private equity fund for investing in Palestinian small- and medium- sized enterprises. The fund will be managed by Riyadi Enterprise Development, an SME-focused investment platform acquired via the firm’s purchase of Riyada Ventures.