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Tapping into the Arab Spring–Gulf Capital’s Dr Karim El Solh in Abu Dhabi
The Abu Dhabi-based asset management firm Gulf Capital recently announced a new credit initiative that would aim to fill the capital vacuum in the region. The CEO, Dr Karim El Solh, sat down with Atique Naqvi to discuss the new fund and investment strategy in the wake of the Arab Spring.
August 9, 2011 12:11 by Atique Naqvi
Where would the Gulf Capital’s new $250 million/$300 million credit fund focus?
We will focus on the entire Middle East, including Egypt and Turkey. The region has large economies and there are a lot of firms hungry for investments, so we will capitalize on the demand in the market. Gulf Capital, which was established in 2006, is basically an alternative asset management firm. The launch of the credit fund would be completed before the end of this year and is subject to regulators’ approval.
Do you plan to tap on investment
opportunities that have been created due to the Arab Spring?
We are very excited about Egypt because it’s a huge market with a large population. The investment deals in that market would see demographic growth, especially in sectors such as education, healthcare, power and water. These basic sectors are growing and they will need capital to grow and the dynamic won’t change regardless of who is in charge of the affairs. Additionally Egypt, having gone through this transformation, would hopefully be more stable and transparent and poised for growth. In the long term we are very optimistic about Egypt.
Would your new credit fund help entrepreneurs or well-established names?
We would provide finance for both. With this new credit fund, we are looking to finance fast-growing firms that are hunting for growth capital. Traditionally, entrepreneurs go to banks for financing and banks need asset-backed collateral, but if you run out of assets and you want to keep growing then you cannot borrow from traditional lenders, you have to come to funds such as ours. Gulf Capital’s fund would lend on cash flow and the future potential of the company, not the existing assets, with a target of 15 percent returns – 10 percent cash coupon and five percent from the equity,
Which sectors would you be targeting with the credit fund?
We are excited about the defensive sectors in the region such as food, healthcare, education, power and water.
What would your strategy be in the current economic climate?
We are focused on Gulf and Turkey and these are the biggest economies of the region. If you look at the Gulf, Saudi Arabia, the UAE and Qatar, they are still growing. Turkey’s economy is booming and Egypt is the largest Arab market and will emerge from its current unstable situation. We will go into these markets as the fundamentals are strong, but you will not see us doing deals in Yemen and Syria anytime soon. Those markets are too exotic.
Do you think the regulatory framework in the region is capable of handling sophisticated financial instruments?
I think financial institutions are evolving. During the process of establishing our new credit fund, we met the UAE Central Bank officials and they were very receptive because the fund would provide additional liquidity to the economy.
How would you sum up the private equity sector in the GCC?
I think the sector is consolidating and we will see an emergence of a number of strong players. To be honest, the private equity sector was a crowded space in the region and to survive firms would either merge or exit the space. The private equity investments gained momentum some five years ago in this region and we are approaching their completion. There will be several exits in the near future.
Why do you think this is the right time to launch a credit fund?
Our fund will be the second credit fund in this region – by far the largest in the Middle East. There is a huge gap in financing as banks are
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