Back in the heady days of 2006 and 2007, there appeared to be no limit to the ambitions of Dubai International Capital (DIC).
The deals were coming thick and fast, and the resources appeared inexhaustible.
"They told us that they had access to unlimited funds. In the climate back then, we believed them," one banker, who asked to remain anonymous, said recently.
It was a measure of the self-confidence and world vision of the investment group in those days that it called one of its units the Global Strategic Equities Fund and backed it with US$3 billion (Dh11.01bn) of resources.
This fund went on to buy a collection of multibillion-dollar stakes in some of the best known companies in the world, such as Sony, Daimler and EADS, the owner of Airbus. All these stakes were sold when the pressure of the financial crisis began to tell on DIC.
"The idea was to give Dubai a strategic portfolio of the most solid, reliable names in global business, but most of it had to be liquidated when times began to get tougher after 2007," said one banker, who asked to remain anonymous.
The strategy was the brainchild of Sameer Al Ansari, a Kuwaiti-born financier appointed by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, to launch and head up DIC in 2004.
The new company was made part of the Dubai Holding conglomerate, personally owned by Sheikh Mohammed, with blue-chip interests across the emirate in hospitality, property, business parks and finance, and for a while, all looked good for the new enterprise.
In an early example of deal-making prowess, Mr Al Ansari made a profit for his shareholder of hundreds of millions of dollars on the £800m (Dh4.64bn) purchase of Madame Tussauds when he later sold the London waxworks museum and other leisure attractions to Merlin Entertainments.
As if to prove that DIC was not going to be just a collection of corporate baubles, it also invested in some solid industrial companies, such as the British engineering firm Doncasters Group, as well as the engineer Mauser and the aluminium products group Almatis (both of Germany). It balanced the portfolio with cash generators such as Travelodge, a budget hotels group based in the United Kingdom.
Via its sponsored funds unit, DIC invested in infrastructure projects in the Middle East and North Africa with two funds totalling $800m.
In the middle of this frenzy of portfolio-building, Mr Al Ansari also found time to mount an attempted takeover of the English Premier League football club Liverpool, which he had long supported. He won the fans' support, but not that of the Liverpool management, which eventually backed a rival American bid.
But the credit crunch of 2007 and the financial crisis the following year exposed the flaws in the investment strategy. Like many private-equity investors, DIC had borrowed large sums to make acquisitions that were priced at the top of the boom market.
When liquidity began to dry up and equity asset values plummeted in 2008, DIC was faced with a funding gap that had to be filled by asset sales and a refinancing. Mr Al Ansari left DIC in the summer of 2010.
Yesterday's announcement that the company has reached final agreement with creditors on the restructuring of outstanding loans totalling $2.5bn represents another phase in the DIC cycle.
People close to the company say the strategy now is for an orderly programme of asset disposals, when justified by valuations, to return capital to the shareholder and creditors.
fkane@thenational.ae
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
All you need to know about Formula E in Saudi Arabia
What The Saudia Ad Diriyah E-Prix
When Saturday
Where Diriyah in Saudi Arabia
What time Qualifying takes place from 11.50am UAE time through until the Super Pole session, which is due to end at 12.55pm. The race, which will last for 45 minutes, starts at 4.05pm.
Who is competing There are 22 drivers, from 11 teams, on the grid, with each vehicle run solely on electronic power.
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
