ME 'attractive destination for capital'
Manama, March 14, 2013
The Middle East region's demographics continue to make it an attractive destination for capital, according to a leading independent specialist investor in global private markets.
In an exclusive interview with the Gulf Daily News, our sister publication, Hermes GPE's chief executive Alan Mackay said the relative strength of many of the regional economies is also key to the region's attractiveness.
"Favourable demographics coupled with a young and growing population and the fact that domestic economies are tied to oil prices, (which have been increasing and creating huge liquidity in the region) represent key strengths," Mackay pointed out.
"Population growth creates opportunities for private equity and this, together with the forecasted level of GDP growth, makes for an exciting investment proposition," he added.
Hermes GPE is currently invested in approximately 200 funds and 60 co-investments across the globe as well as a portfolio of infrastructure assets. It manages $10.1 billion for major institutional investors and pension funds worldwide.
"While there is no dedicated fund for the Middle East, we have the region covered under eight different Middle East and North Africa (Mena) and emerging market funds... We also have three direct co-investments in the region," said Mackay.
Reviewing private equity (PE) developments over the last few years, the chief executive said the ME region has bucked the trend in that average deal sizes have gone up from $21 million in 2008 to $42 million in 2012, whereas world-wide the deal sizes have gone down.
"The Mena region was punching above its weight in emerging markets PE deal share before 2009, when the trend reversed. Since 2012, growth seems to be coming back... I'm confident about long-term growth prospects of the Mena private equity industry, " he added.
When asked what he saw as the major challenges to growth, he said the region is currently very volatile which raises some concerns for investors.
"There is also a need for greater consistency of regulations across the region. Deals are country specific which makes it more difficult for private equity funds. The hit ratio of volumes vs transactions is still low in the region indicating a shortage of true investment opportunities," the expert stated.
When asked why one would choose private equity over other kinds of funding, Mackay said, "There are two main differentiators that private equity (as an asset class) brings into companies - one, a degree of institutionalisation and two, less emotional money compared with other asset classes.-TradeArabia News Service