Emirates Financial Services PSC (EFS), UAE’s leading investment house today announced its feeder portfolio into a US$ 500 million pre-IPO fund launched by the Global Investment House (Global).
The ‘Pre-IPO GCC Opportunistic Fund’ launched by Global seeks to achieve superior returns by investing in IPOs and pre-IPO issues in the GCC markets with controlled levels of risk.
Mr. Khalid Kalban, Chairman of EFS, said that the feeder portfolio was established by EFS within the Emirates Family of Funds for channelling investments from the UAE into the Fund and therefore, into the Gulf region’s IPO and pre-IPO capital markets.
“What prompted EFS to establish this feeder portfolio is the phenomenal increase in trading volumes in the last five years. Many high value and institutional investors now have begun to regard regional IPOs as a valuable asset class. For fund managers like EFS, this is a tremendous opportunity, and one worthy of tapping into, through such feeder mechanisms,” Mr. Kalban added.
Mr. Suresh Kumar, Chief Executive Officer of EFS, pointed to the strong and stellar performances across the GCC equity market and in particular, the escalating trend of funnelling and leveraging the liquidity among the investors and in the financial systems, into such IPOs. In such a scenario, investing opportunistically in pre-IPO and private placement offerings can enable such a feeder portfolio to benefit from the potential in the public markets; once this scrip is listed and traded quickly.
Mr. Kalban added that given the paucity of IPOs and entry barriers, this trend will only be reinforced in the medium term, as long as quality, credibility and investor appetite can be sustained. He also added that between the years 2000 and 2004, the aggregate equity trading volumes on the GCC exchanges rose from 7.9 billion shares to 60 billion shares and the total market capitalisation in the GCC markets multiplied by almost eight times i.e. from US$ 120 billion in the year 2000 to US$ 900 billion in the current year.
Mr. Omar M. El-Quqa, Executive Vice President of Global Investment House, affirmed that given the number of IPOs in the pipeline, of the value of US$ 9 billion, the Global Pre-IPO GCC Opportunistic Fund has significant potential for capital appreciation and therefore the distribution of gains to investors in the Fund. He clarified that although the Fund has a life of five years, it has a full lock-in period of two years, with the minimum holding requirement being reduced to 50% of the initial commitment over the five-year period.
Mr. El-Quqa concluded by stating that the Fund, which will also have a dividend distribution policy, targets an Internal Rate of Return (IRR) of 20% per annum. The minimum investment is US$ 500,000 and multiples of US$ 250,000 thereafter, he added
