Invest AD launches Libya fund to tap high growth

Abu Dhabi financial services company Invest AD has launched a fund to invest in Libya, one of Africa’s fastest growing economies. 

Invest AD has already committed its own capital to the fund, which will invest in Libya’s $2.2 billion stock market, as well as participating in initial public offerings (IPOs) and taking pre-IPO stakes in companies. 

“Libya has taken positive steps to open its economy and is reaping the rewards, with very high rates of economic growth,” said Invest AD Chief Executive Officer Nazem Fawwaz Al Kudsi. “We’re glad to be there at an early stage of this process, and are very much long-term investors.  This fund will contribute capital to some of the country’s most promising businesses to help them grow for years to come.” 

The Libyan economy benefits greatly from oil but has room to increase production. At 1.79 million barrels per day, the country is Africa's fourth biggest producer, while it has the continent's biggest proven reserves. New industries such as petrochemicals, iron and steel, and manufacturing are growing fast. 

Libya’s gross domestic product (GDP) is expected to grow at a rate of about 7.7 percent annually over the next four years, according to the International Monetary Fund (IMF), with government spending on infrastructure likely to have a strong knock-on effect on the wider economy.

Libya’s stock market, launched in 2007, has grown to 25 listed companies and over 10 IPOs are in the pipeline. 

Invest AD, owned by the Abu Dhabi government, has launched several funds to invest in frontier markets.

Its two flagship strategies – for emerging Africa and the Arabian Gulf – both gave total returns of just under 20 percent in 2010 to rank at the very top of their categories. Invest AD’s Iraq opportunity fund gave a return of just over 10 percent from its launch in early October 2010 to the end of the year.

“We are very bullish on frontier markets, which have lagged the global markets recovery in the last couple of years, but display some of the highest rates of economic growth in the world,” said Mohammed Al Hashemi, head of Invest AD Asset Management. 

The MSCI Frontier Markets Index has gained just over 25 percent since mid-2010, but is still around 35 percent below its level at the beginning of 2008. Meanwhile, the MSCI World index is about 9 percent below its January 2008 levels, and the MSCI Emerging Markets index has fully bounced back.

Invest AD’s Libya fund aims to take advantage of the country’s ongoing economic liberalization, and greater integration into global markets. 

As with many frontier markets, the banking sector is strongly represented on Libya’s stock market and offers investors the prospect of strong growth. Libya’s banks, which trade at around six times earnings, are giving a 20 percent return on equity, with loan growth expected to rise sharply in coming years as the economy diversifies.