May 11, 2008 by Felix
Middle East economies are booming (no pun intended).
Leaders of the Sheikdoms have decided their nations need to be less dependent on oil and have begun massive investment in the attempt to diversify the local economy. A small pool of international hedge funds have already entered into the markets by launching regionally-focused vehicles. The Abu Dhabi Investment Authority, Kuwait Investment Authority and Qatar Investment Authority are among a group of Middle East funds with assets estimated to be worth $1.5tn.
The Boston Globe earlier this month reported that recently, partners from major US private equity firms flew to Abu Dhabi, Kuwait, Saudi Arabia, and other destinations in the region to court wealthy investors. For all but a few, this is brand new territory. And it’s paying off: Billions of dollars from the Middle East have poured into these funds over the past six months, and more is being pledged.”
Bader Mohammad Al-Sa’ad, managing director of the Kuwait Investment Authority, which manages $250 billion, said he expects money from the Middle East to keep flowing into US hedge funds, even with the recent slowdown in buyout deals. “With this crisis, we’re going to see private equity firms going back to the basics,” and perhaps using less leverage, he said in an interview. “We’ll see a lot of opportunity.”
In the Middle East, a tenet of Islamic finance remains a bar on selling something you do not own, tearing away one of hedge funds’ main tactics: shorting companies and using leverage. As the credit crunch and stock market meltdown hit markets around the world, investors outside the Middle East are now beginning to look for investment vehicles with healthy returns that are based in stable environments.
Structured products based in the Middle East, particularly hedge funds, are perfect examples.
Bahrain leads the region with 57 funds worth around US$2.6 billion, and Dubai is determined to establish a competent global hedge fund centre.
As global investment banks flock to the region, they have started to provide synthetic, OTC products that fund managers can use to mimic shorting stocks, through transactions such as equity swaps and other derivatives.
Regional players have started to utilize these hedging tools to cultivate the green shoots of a hedge fund industry, finding counter-parties in institutions such as Deutsche Bank, Merrill Lynch and Credit Suisse. Citigroup’s decision to relocate Alberto Verme, the co-head of its investment banking unit in London to Dubai, is the latest in a line of high-profile transfers to the region.
When will you begin your Journey to the (Middle) East?
Felix.
read more
The year is coming to an end, and not far away many of us can see the light to a recovery in the market and economy. They say 2010 was a tough year. A year of survival, consolidation, restructuring, and liquidation. Not so much for Middle Eastern investors. Despite the market downturn and volatility, many Middle Eastern investors were still being very active investors around the world. From January to December 2010, investors in the Middle East invested more than $14 billion in disclosed assets globally, across asset classes such as listed equities, private companies, land, etc. Qatar has been the most active investor in the Middle East, led by the investments made by Qatari Diar, Qatar Investment Authority, Qatar First Investment Bank and QInvest. We have summarised the known deals made by Middle Eastern Investors in 2010 in a post on Apache Advisors’ website. If there is anything we missed, please drop us a mail and we will update the post.
