Ex-Malaysia PM behind $500m fund

Former Malaysian PM Tun Abdullah Badawi has become chairman of Azka Capital's advisory board, which will raise a first-time fund for investment in the halal industry.

Tun Abdullah Ahmad Badawi, prime minister of Malaysia from 2003 to 2009, has announced plans to raise a $500 million private equity fund for investing in the halal-compliant food industry, according to a firm statement.

The money will be managed by Azka Capital, a private equity firm set up to address halal investments – companies that adhere to Muslim standards for food, pharmaceuticals and cosmetics. It is the first private equity fund focused exclusively on this sector, and Badawi will serve as chairman of Azka's advisory board.

Azka managing principal Darhim Hashim compares the size and growth of the halal industry to emerging countries like India and China, because it has a “captive market” of at least 1.6 billion Muslims. Global halal sales total $2.1 trillion annually, according to the statement, and Muslim communities are very particular about halal standards.

“The recent scandals including horsemeat in Europe and, more alarmingly, the evidence of pork DNA in halal-certified beef by the very multinational companies responsible for halal integrity should be unacceptable to affected constituencies,” Rushdi Siddiqui, co-founder and managing director of Azka, said in the statement.

Hashim added that a private equity fund is uniquely suited to invest in the halal industry. Halal players are usually

[Livestock] is where the vacuum [of investment] is, and also where halal is most crucial

Darhim Hashim, Azka Capital

small and scattered, he told Private Equity International, making the industry quite fragmented. A private equity vehicle will ideally allow the firm to consolidate private players and have some influence in their operations.

In the first phase, the Halal Opportunity Fund will focus on companies working with livestock, especially midstream distribution. “That’s where the vacuum [of investment] is, and also where halal is most crucial,” Hashim said. Even the way an animal is slaughtered is part of halal, he added.

Though the fund is global, Azka will primarily target investments in the ASEAN region and Australia. The fund’s mandate will not preclude investment in non-compliant companies, Hashim added. Part of the fund’s value-add could be to make their investments halal-compliant.

The $500 million is expected to be raised in stages over the next few years, starting with the $100 million Halal Opportunities Fund, which Azka hopes to close in about 18 months, according to Hashim. 

Azka has employed Nova Capital Global Markets, a middle market global investment bank, as a placement agent. The minimum commitment size for Azka’s fund will be $1 million, and Hashim believes that most of its LPs will consist of local family offices and high net-worth individuals, but it will be below the radar for most sovereign wealth funds.

“It’s not just the size [of our fund], but also investor appetite for this kind of industry,” Hashim explained, which at this point does not extend much beyond Muslims. 

Hashim expects the fund to average 18 to 20 percent IRR, which he considers to be slightly lower than usual private equity returns.