Side Letter: Naqvi’s arrest, French fund scraps fees and carry, IFC on impact

A timeline of what led to last week's arrest of Abraaj's erstwhile founder Arif Naqvi. Here’s today's brief, for our valued subscribers only.

A timeline of what led to last week’s arrest of Abraaj’s erstwhile founder Arif Naqvi. Here’s today’s brief, for our valued subscribers only.

Just happened

Naqvi’s day in court

The SEC has laid out its complaint about Abraaj Group founder Arif Naqvi, as this timeline shows. According to the 22-page document, money was first allegedly “misappropriated” from Abraaj’s 2015-vintage Growth Markets Health Fund at the end of 2016. What followed was a series of attempts to plug shortfalls, free up capital by delaying deals and omit disclosures to LPs, the SEC claims. Naqvi, who has always denied any wrongdoing, appears defiant. In an interview last month, he told the UAE’s The National that people “don’t have a bad word to say about me who know me”. Naqvi, who was nabbed at Heathrow Airport last week, is set to appear via videolink in a London court on Thursday, a spokeswoman for London’s Metropolitan Police confirmed to Private Equity International. He faces extradition to the US.

Charity case

France’s BEX Capital has scrapped fees and carry for some limited partners in its third fund of funds secondaries vehicle. Fund III, which closed on $365 million last week, is BEX’s first vehicle to offer ‘X shares’ for non-governmental organisations and major non-profit foundations. X shares are exempt from management fees and carried interest, and allow NGOs and non-profits to reinvest their gross returns.

ILPA guidance

It’s GPs who stand to benefit most from ILPA’s latest guidance on fund restructurings, write our colleagues at Secondaries Investor. Most LPs have been through a GP-led before, whereas most GP haven’t. Things sponsors should do include informing LPs early that a process is taking place, identifying and dealing promptly with potential conflicts of interest, and explaining why the deal is beneficial for LPs and not just a boon for themselves. Failure to do this is likely to cause reputational damage and could hurt a GP’s ability to fundraise.

Essentials

Blowing bubbles. The Financial Times’ financial editor reflects on debt and PE, noting that average leverage multiples are “in reality more like nine times rather than six” (paywall) because of ever more generous earnings adjustments. “Cheating rarely ends well,” he adds. He equates the struggles of some high street and retail chains – Toys R Us, Pizza Express, Zizzi – to early “early signs of stress” for the private equity market and manages to tie in the UK housing market and a slowdown in China’s yuan-denominated fundraising in a way that will surely annoy PE industry readers.

The right impact. The International Finance Corporation has put together nine principles that create a common standard for impact investing outlining essential features across all stages of the investment lifecycle, including independent verification. KKR, TPG and Partners Group, among others, are early adopters. IFC estimates the impact market could be worth as much as $26 trillion, of which $5 trillion is from private capital.

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including AbraajBEX Capital and IFC from today’s Side Letter.

He said it

“Just don’t shut down the business!”

A January 2017 email from Abraaj Group’s Arif Naqvi to the firm’s managing director after being told of cashflow shortfalls, as alleged by the SEC.


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Today’s letter was prepared by Toby MitchenallAdam LeRod JamesAlex LynnCarmela MendozaSheikh Jahan and Isobel Markham


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