Islamic fund eyes private buyouts

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Islamic Buyout Fund will target IRR of 20% per annum.

Global Investment House, Millennium Capital and Dubai Islamic Bank have received approval from the Central Bank of Bahrain for a US $500 million Islamic buyout fund.

The fund will provide investors access to Shariah compliant private equity investments, which the partners see as a largely untapped asset class across the region.

As seed investors, Global, DIB and Millennium Capital will be contributing 13% of the fund's capital. Global will be the investment manager to the Fund, while Millennium Capital will act as investment advisor.

The Fund has been set up as a parallel Shariah compliant investment vehicle to the Global Buyout Fund, a US $615 million conventional private equity fund that was closed earlier this year and is managed by Global.

The Islamic Buyout Fund intends to acquire controlling positions, together with the existing Global Buyout Fund or independently, in Shariah compliant buyout opportunities in the Middle East and North Africa, South and South East Asia regions.

Shailesh Dash, head of alternative investments at Global, said: "Global has a strong track record in private equity investments while Dubai Islamic Bank and Millennium Capital are pioneers in Islamic finance and bring in-depth expertise in structuring and executing Shariah compliant transactions.

"The seed investors combine a vast regional and international network of institutional and high net worth investors and have access to a continuous flow of deals through their existing relationships, which is vital to realise and exceed investors' expectations on a risk-adjusted basis."

The Fund will target to achieve a net IRR of 20% per annum by investing in portfolio companies where the investment manager and advisor see opportunity to add value through active support of portfolio companies' management and operations. Upon every successful exit from a portfolio company throughout the fund life of seven years, profits will be distributed to investors.

Dash sees private equity as still a largely untapped asset class in the MENA region. Private equity in general and Islamic private equity investment in particular are ideal outlets for the liquidity that exists in the region.

Omar Masrur, head of private equity at Millennium Capital, added: "In addition to Global's deal execution capability, the fund will have access to DIB's extensive network of medium to large-sized businesses and affiliates as an additional source of Shariah compliant deal flow. We believe the Islamic Buyout Fund is a unique program for private equity investors in the region to benefit from the complementary strengths of two of MENA's best names, Global and DIB."

Global currently manages more than US $2.2 billion invested in alternative assets, including private equity. Of the US $1.6 billion assets under management in private equity, US $1 billion has been invested in 46 companies, yielding a net IRR of 55.82% as of December 31, 2007.

Dubai Islamic Bank is listed on the Dubai Financial Market and reported revenue and net profit of US $1.9 billion and US $680 million in 2007.

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