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Investcorp H1 profit slumps 90 percent on hedge fund woes

Alternative investment manager Investcorp reported a 90-percent drop in half-year profits on Monday, hit by declining hedge fund revenues.

February 13, 2012 2:17 by

The Bahrain-based firm, which once floated luxury brands Gucci and Tiffany & Co, said net profit was $5.3 million for the half-year ended Dec. 30, compared to $56.2 million in the prior-year period. Investcorp’s fiscal year ends June 30.

Investment said fee income from client business activities and corporate investment asset-based income both rose but it was not enough to overcome the impact of the negative hedge fund returns as investors pulled out amid the euro zone debt crisit.

“We are significantly readjusting our positioning to hedge funds and giving greater allocation to portfolio insurance,” Rishi Kapoor, Investcorp’s chief financial officer, said on a conference call.

“We’ve taken aggressive moves to protect against the impact of hedge funds.”

Investcorp also said the sale of its 26-percent equity stake in Redington International Holdings Ltd, an information technology and telecoms firm, back to its parent firm will generate a $49.8-million capital gain on the deal once it’s finalized.

The Bahraini asset manager said it expects the sale to close by early March.

It had $11.6 billion in assets under management at the end of December, down slightly from $11.8 billion at June 30.

The company is looking to spend more than $400 million on stakes in companies in Turkey and in the Gulf Arab states in the next two years through its $1 billion Gulf Opportunities Fund I which is 50 per cent invested so far in four deals, a senior executive told Reuters in November.

“Our Gulf Opportunities Fund is only 50 percent invested so we hope to close three to five deals this year,” Kapoor said.

“The US has shown some resilience as well. Even in Europe, if you dig deeper into specific companies you can find very attractive valuations.”

Investcorp has closed four private equity deals in the Middle East and North Africa since its launch in 2008, in Turkey, Saudi Arabia, the United Arab Emirates and Kuwait.

It invested $98 million in October 2008 in Redington Gulf. It also has stakes in gold and jewellery manufacturer L’azurde and a 20 percent stake in Gulf Cryo, a manufacturer of industrial, medical and specialty gases.

Investcorp had in November acquired three real estate assets in the United States for $100 million, taking its total buys in the US to eight in 2011, with a combined value of $300 million. (Reporting By Mirna Sleiman, Editing by Humeyra Pamuk)

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