Ripe pickings in times of distress

The Life: Jassim Alseddiqi, the chief executive of Abu Dhabi Capital Management, a secondary private-equity fund, focuses on buying out other funds in distress. He talks about why he feels comfortable in a distressed space.

"We buy old funds that investors want to get out of," says Jassim Alseddiqi of Abu Dhabi Capital Management. Lee Hoagland / The National

Jassim Alseddiqi is the chief executive of Abu Dhabi Capital Management, a secondary private-equity fund that focuses on buying out other funds in distress. From his open-plan office at Al Bateen Towers in the capital, Mr Alseddiqi talks about why he feels comfortable in a distressed space.

So what exactly is secondary private equity?

We buy old funds that investors want to get out of. If the value of the assets [the investor] is holding is US$10 million (Dh36.7m), I give him $8m, $5m or even $4m depending on how risky the assets in the fund are. If it's a really risky fund, I'll pay $2m. But the value is still $10m, so we make money on the difference.

Many in the market are talking about 2011 as the year of restructuring, when companies and distressed investors are being forced to sell off assets to pay off debt. Do you have a lot of funds to pick and choose from?

Today [Middle East and North Africa] is very desperate for so many reasons. They need to sell right away and they can't wait. Investments in the region have not recovered and there are not enough buyers. The major players in secondary private equity are busy in US and Europe. Plus they don't understand the region, and we do.

Would you say you work like a vulture fund and circle those in distress?

It does not work like that usually. We do not cold-call distressed investors. We move fast only on things we know and we are not so aggressive that we will pay any dollar. We are a small set-up, not a $3 billion conglomerate.

How much have you already invested?

We have $45m committed from outside investors and out of this we have invested $20m in three transactions - two that are local, and one in the US.

Can you tell me what the deals were?

You know that's confidential. It's a sensitive market, so if you tell the public a fund is getting rid of assets it may have a chain reaction.

Moving on, who are the investors backing you?

It's high-net-worth individuals and institutions and they're 100 per cent from the UAE. We have a target size of $100m.

But there are only so many distressed investors. How much longer can your good fortune last?

There have always been distressed investors but I'm an optimist in general. I believe regionally the economy will improve but it takes a few years. Our investment period is three years and lifetime of the fund is five years, so timing-wise we're on the spot.

* Farah Halime