Private Equity in Middle EastOctober 2005
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Istithmar Overview A major investment holding company based in the UAE
Focuses on Private Equity, Alternative Investments, and Real Estate
Set up in June 2003 with an initial capital pool of USD 2 Billion
Form part of the Group comprising Dubai’s Ports Customs & Free Zone Corporation, Nakheel, DMCC, and Tejari
Key mission: to earn an exceptional return for its investors while maintaining due regard for risk
Investment based on its “I” investment philosophy namely Ideas, Inquiry & Integrity
Investments over USD 850 Million to date
Private Equity in Middle East
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Private Equity in 2005 Private equity continues to be one of the major economic
drivers of the world’s economy
Represents approximately 7.5%* of global asset allocations
Continues to play a major role in restructuring of underperforming assets worldwide
Analysis suggests as much as USD 20 billion allocated to funds focusing in the Middle East Region
* Source: Private Equity: Catalyst for Economic Growth in the Middle East Region
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Investment Focus to Middle East Private equity picking up pace in Middle East, as Arabs prefer to keep their
assets home due to: Lackluster performance of US and European stock markets Out performance by home markets Increased scrutiny by foreign governments post 9/11 Increase in oil prices and liquidity thereon
Region has been a source for PE firms that raises capital in the region and invest in US and Europe
Currently, market is relatively small, with approx. USD 250 M of funds managed by PE firms
Managers view that the market is on the verge of major growth Shuaa Capital and National Investor to add USD 250 M to the pool Abraaj to add USD 500 M to the pool Injazat Fund’s additional fund of approximately USD 100 M Players like Istithmar making large scale investments Other players sprouting in the region
Managers view about USD 600 billion of assets likely to be denationalized in the Arab world in the next 10 years resulting in an opportunity for PE players
Incentive for companies to partner with PE investor enhanced by success of local stock market
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Country GDP 2004USD B
GDP Growth %
Budget Surplus as a
% of GDP
Budget SurplusUSD B
Inflation Rate
Saudi Arabia
249 5.3% 3.6% 9.00 0.7%
UAE 90 7.0% (0.4%) (0.36) 3.2%
Qatar 20 8.3% 15.0% 3.00 4.0%
Oman 24 0.7% 1.5% 0.36 0.2%
Bahrain 10 5.6% 6.6% 0.66 2.2%
Kuwait 42 9.9% 18.2% 7.64 2.3%
Iran 149 6.3% 5.7% 8.49 14.9%
GCC GDP & Surplus GCC countries have benefited from increase in oil prices which
in turn has helped increase in budget surpluses
Source: EIU Report. Data for 2004
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Movement of Capital from foreign based firms to locally managed firms
Closer Management Deploy in local markets and international Estimated that as much as US$ 20 billion raised in dedicated
funds devoted to private equity in next five years
Finding management talent
Fund Managers Corporate Managers
Globalization of Financial Markets Standard for managers will have to emulate that of
international competitors Will have a suite of products (Local vs, International;
Traditional vs, Alternative; Islamic vs traditional)
Future for Regional Managers
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Ideas. Inquiry. Integrity
Istithmar means Investment.