Invest AD realigns business to suit market demand

Nazem al Kudsi, the chief executive of Invest AD, which has streamlined its business model to suit market demand. Sammy Dallal / The National

Invest AD, an Abu Dhabi Government-owned investment company, has disbanded its investment banking team and cancelled plans to offer a property fund to outside investors as it realigns its business to suit market demand. The move reflects a wider trend in which financial companies have streamlined their business models to cope with reduced investor appetite, a dearth of financing from banks and declines in prices of stocks and property brought on by the global downturn. The government-owned conglomerates Dubai Holding and Dubai World have made sweeping structural changes in their businesses to save money and improve efficiency. Smaller, more nimble firms such as Invest AD have made more modest changes of their own.

Invest AD's investment banking arm was set up about a year and a half ago and headed by Alexandre Carre de Malberg, a veteran of the UK investment bank Rothschild. With few debt issuances, stock listings and merger and acquisition deals to advise on in the region, however, the company decided to rethink the move. "After careful consideration of market conditions, Invest AD has decided to close its small investment banking advisory team," a spokesman said when contacted by The National. "Invest AD continues to offer attractive third-party investment opportunities in listed equities and private equity, while being an active proprietary investor in all sectors of the market."

While the Middle East's market for investment banking services remains sizeable, today's harsher economic backdrop has made the business far less lucrative. Investment banks made US$649 million (Dh2.38 billion) in fees from advising on deals in the Middle East last year, according to Thomson Reuters. That was about 42 per cent less than they made in the previous year. Nazem al Kudsi, Invest AD's chief executive, had also earlier outlined a fund of between $200m and $500m to make opportunistic property investments, including in distressed property. Those plans have been put on hold because of a lack of interest in property among investors globally, though the fund could be restarted if markets improve. Invest AD already has a portfolio of UAE property and is developing the 26-storey Capital Tower office building and two residential blocks in Abu Dhabi.

The news on Invest AD follows an earlier report that the company had shut down an infrastructure fund set up as a joint venture with UBS's asset management division in 2008. That fund, which was to raise $600m to invest in infrastructure projects in the MENA region, was to be seeded with Invest AD's investment in Airport International Group, which has the concession to expand and operate Queen Alia International Airport in Jordan, and a stake in a regional air conditioning company. It is understood that those assets will remain on Invest AD's proprietary books, where the company keeps investments made on its own behalf.

With the cancellation of its property fund and closure of its investment banking and infrastructure arms, Invest AD now has three primary lines of business: proprietary investments; asset management; and private equity. The private-equity division has a pair of funds that have made numerous investments across the region. The second fund, which Invest AD is seeding with $75m, last year spent ?50m (Dh249.8m) on a stake in Ekol Lojistik, a Turkish company.

Samir Assaad, the head of private equity at Invest AD, said recently he envisioned one or two more transactions this year as the fund increased its total assets to $400m, including the seed capital. Invest AD was founded in 1977 as a subsidiary of the government-owned Abu Dhabi Investment Council. While it began as a government investment vehicle, its focus changed in 2007 when it started allowing outsiders to invest alongside it. The firm used to be known as the Abu Dhabi Investment Company but changed its name to Invest AD last year.

[e-mail] The original version of this story as posted on the website said assets held by an infrastructure fund were moved back under Invest AD's control when the fund dissolved. Those assets, including an interest in an airport development company, were to be transferred to the fund but had not been moved under its umbrella at the time of its closure.