Fund managers bargain-hunt in region

DUBAI // Two Dubai-based regional investment funds were announced yesterday in a sign that asset managers are viewing the economic turmoil as an opportunity to hunt for bargains in the Middle East. UBS and MerchantBridge announced one fund, while the Dubai Multi-Commodities Centre (DMCC), Barclays Capital and Shariah Capital announced another. This follows a string of other fund announcements in the region in the past month, suggesting some fund managers remain confident in the Gulf's ability to rebound from economic troubles that have caused regional stock markets to lose about US$500 billion (Dh1.83 trillion) in value this year. ING Investment Management and BNP Paribas announced separate funds last week to jump into Middle East markets and tap investors who still see value in the region. ING opened its first Middle East and North Africa equity fund, targeting $500 million in two years, while ADIC-UBS Infrastructure Investment, a 50-50 joint venture between the Abu Dhabi Investment Company and UBS Asset Management, said it would launch a fund worth up to $1bn. "For any fund, right now is the perfect time to launch, because all assets are cheap. If you launch now, performance is probably going to be good, and investors are going to be happy," said Giyas Gokkent, an economist at the National Bank of Abu Dhabi. "The trick is getting the money to put into these investments. Because some investors have already had their fingers burnt, people have some trepidation putting fresh money into any new fund." UBS and MerchantBridge, a privately owned investment firm based in London, launched a $500m joint private equity fund. Called MerchantBridge-UBS Private Equity, the fund will invest primarily in the oil and gas industry, financial services, and light and medium industries throughout the Middle East, Africa, and Turkey. "The timing is very attractive from our perspective for two reasons," said Basil al Rahim, the fund's chief executive. "First, because of a shortage of funding from other sources, private equity funds are in a good position to negotiate good terms on their investments," he said. The second was because the economies in the region should be back on their feet in several years, before his fund expected to sell its stakes in the companies it invested in. The MerchantBridge-UBS fund was seeded with $40m from both of its parent firms, and expects to raise the remaining $420m this year, largely from institutional investors based outside the region, according to Mr Rahim. He said large international investors had already expressed interest in taking stakes in Middle Eastern private equity. The fund already has two deals nearing their final stages, one in telecommunications and another in oil and gas, he added. Together, the deals will represent between 15 per cent and 20 per cent of the fund's total capital, and will be announced in January. Given the global credit shortage, Mr Rahim said the fund was designed not to depend on large amounts of extra cash borrowed from banks in order to pursue more ambitious deals. He said if MerchantBridge-UBS could raise enough money from banks to match the amount put up by original investors, he would be happy. The DMCC joined Barclays Capital and Shariah Capital in also launching a fund yesterday - a Shariah-compliant alternative investment fund focusing on the global commodities market. The fund - which will be managed by BlackRock, one of the largest investment managers in the world with $1.26 trillion in assets - is being marketed as a speciality hedge fund geared exclusively towards equities investments and aimed at international institutional investors with an interest in commodities. Officials behind the deal said that even considering the recent economic climate and fall in commodity prices, it was a sector that promised long-term stability. "We don't allow bonds or options - all those kinds of tools got the world to where it is today in many senses," said Eric Meyer, the chief executive of Shariah Capital, a US-based organisation with an office in Dubai. "What we are offering is equities - transparent, no secret black box." The investment strategy is a follow-up to the launch earlier this year by the DMCC of the Dubai Shariah Asset Management (DSAM) fund in collaboration with Shariah Capital. The partnership dates back to last year, when the DMCC signed an agreement with Shariah Capital to explore the development of Shariah-compliant investment products based on hard assets such as commodities and precious metals. tpantin@thenational.ae vsalama@thenational.ae