The trend bucker

Abraaj Capital is nearing a $4 billion final close for its third buyout fund, double the size of the $2 billion infrastructure and growth capital fund it raised last year and eight times larger than its second buyout fund, which raised $500 million in 2005.

The firm has held a first close on commitments for Fund III totalling $3 billion entirely from existing limited partners, managing director Mustafa Abdel-Wadood said at a conference in Dubai.

Dubai-headquartered Abraaj raised $116million for its first fund in 2003, and has since rapidly expanded its multi-strategy franchise across the region.

In August the firm appointed Farrukh Abbas to lead its efforts in Pakistan and recently acquired a controlling stake in energy supplier, the Karachi Electric Supply Company. While financial terms were not disclosed, the deal is thought to be worth around $400 million.

News of its fundraising success is significant at a time when many private equity firms are struggling to raise the same level of large commitments they have received the past from institutional investors. Many such investors are now faced with shrinking assets and slowing realisations, and as a result, over-weighted private equity programmes.

Making smaller commitments as a result of current global financial turmoil is a trend among Middle Eastern limited partners, says Edward Frazer, founder and chief executive of Trinity Group, a London-based placement agent that specialises in raising capital in the Middle East and has done so for firms including The Carlyle Group, Cinven, Kohlberg Kravis Roberts and Lexington Partners.

“They've just decided to wait and take a look at how things will play out. We see people, particularly in the Middle East, who have decided to defer [commitments] until the first or second quarter of next year,”he said.

“We get so many calls from so many people thinking that going to the Middle East is Nirvana because of all their liquidity,”he added.

But aside from the glut of product that has come on the market – Frazer estimates more than 600 emerging markets funds alone are being pitched to Middle Eastern investors – factors like the drop in oil price and disastrous financial sector bets taken by some sovereign funds are impacting budgets and investment committee decisions.

A consortium comprising Apax Partners, Saban Capital Group and Mori Arkin has upped its stake in Israeli telecom company Bezeq Israel Telecom by a further 11 percent for Shk1.1 billion ($331 million; €228 million). The investor group acquired a 30 percent stake in Bezeq, which was privatised in the late 1990s, in 2005.

Millennium Private Equity has invested an undisclosed amount in Californian ethernet company Turin Networks from its Telecom, Media and Technology Fund. Millennium, which is a subsidiary of Dubai-based investment bank Millennium Finance Corporation, is currently raising $1 billion for the fund, having held a first close on $150 million in April.

The Dubai government-backed firm Istithmar World has opened an office in New York following the opening of a Shanghai office last year. The move is a “natural evolution”of the firm's presence and asset base in the US and Canada, said chairman HE Sultan Bin Sulayem in a statement. The firm's North American investments include Cirque du Soleil and Barneys New York.

Newhaven Investments House, a collaboration between Canada's Newhaven Merchant Bankers and Investments House, the investment arm of a prominent Gulf-based family, is raising $200 million for Amara Holdings, a Sharia-complaint investment fund that will target opportunities in China, the Middle East and India. The fund is partnering with Pan China Construction to co-invest in joint ventures.

Former Pakistani trade and industry minister Razak Dawood will advise Dubai-based HBG Holdings on its South Asian investments. HBG, which will invest in the region from its $500 million vehicle HBG Investment Holdings, is evaluating “a number of potential transactions” mostly in partnership with operating groups based in Saudi Arabia.

Samena Capital has doubled the size of its investment team with five new hires. Celia Farnon, Philip Young, Swaroop Patel, Robert Clements and Lien Ber Luen join as the firm raises its debut special situations fund targeting $350 million. Samena held a first close last month on $200 million.

Investcorp has hired former Morley Fund Management managing director and Morgan Stanley executive James Tanner as its placement chief, a role previously filled by retiring Investcorp veteran Zahid Zakiuddin. Tanner will be based in the investment firm's Bahrain headquarters overseeing fundraising for private equity, real estate, venture, growth capital and hedge fund platforms.

Middle East investment firm Dubai Investment Capital, which has more than doubled its staff in the past year, has made three appointments, including former Bain executive Alykhan Nathoo as head of its emerging markets division. Eric Kump and Marc Hollander also join as managing director and finance director, respectively, for DIC Private Equity.