Sovereign edge

Why take on third-party capital and rebrand?

The reality is today, there’s a big gap in the market: private equity in the region is quite nascent – five, six years old is probably the oldest investment company around. We see a huge gap in that there’s no one who’s had the history and networks that we have in the region.
The rebranding was to signal the new strategy to the market – that we’re no longer Abu Dhabi-centric in terms of raising capital – and to differentiate our strategy and ourselves from the other [Abu Dhabi-related groups’] acronyms. We were ADIC [Abu Dhabi Investment Company], and the Abu Dhabi Investment Council was also ADIC, so there was a lot of confusion.

How is your team different than other MENA-focused private equity firms?

That’s the lynchpin to this whole thing. Invest AD Private Equity invests in the most promising growth capital expansion situations in the region, and obviously we look at all the ways that we can increase EBITDA at our portfolio companies. But as part of Abu Dhabi Inc, we have something a bit different from other private equity houses. Because of our extensive networks, we can help find new business opportunities, and create value for the companies. It’s a way to reduce risk in the asset class. 

Are you targeting LPs from certain geographies?

We’re targeting our home markets, the GCC, primarily Saudi Arabia, Egypt, Turkey and the UAE. These markets are very critical for us because that’s where our companies are expanding and [we target investors that can also] help them grow across the regions. We’re also seeing some good interest from Asia – Asian industrial groups that already operate in the region or want to tap into the region – because of the trade flows between Asia and the Middle East today. We’re also seeing some interest from European LPs, which wasn’t in our initial thoughts for fundraising… they’re seeing a market that’s growing on average 4 percent to 5 percent in a global economy where that doesn’t exist, excluding the BRIC countries. They’re seeing also a very healthy cleansing or consolidation [of GPs] for the [MENASA private equity] industry.

Are Dubai’s debt woes a key focus for potential LPs?

People definitely ask, and that’s because Dubai has been a focal point to the region. Dubai has grown quickly, has some very good companies, and in time, will bounce back. Potentially, there will be some exciting opportunities there. But it’s also a relatively small piece of the regional economy and when investors look at the overall region, what’s happening in Abu Dhabi, Saudi Arabia, Qatar and other places, Dubai doesn’t have a huge impact. The reality is in the long term, the country is benefitting tremendously from the restructuring process in Dubai, in regards to the increased transparency and improved corporate governance and regulations and so on. For us people do ask, but I think people are comforted by who we are and the controls we have in place.

What sort of controls?

We’ve invested significantly in the infrastructure of the rest of the group, hiring people from top institutions for risk and compliance, audit, legal, etc. That infrastructure gives investors a lot of comfort. If we’re going to go out to the market as a sovereign that’s changed its strategy, you have to [have those best practice and governance measures in place] otherwise you don’t stand a chance.

What’s ahead for 2010?

We’re continuing to deploy capital – we have access to capital from our own balance sheet and we have the full support of our parent to go ahead and continue making great investments because we strongly believe that the timing is perfect and we have seen some significant value-driven investment opportunities. We don’t want to miss out any great opportunities because of a fundraising gap.