Arcapita eyes more stable funds business

Bahraini investment house Arcapita plans to build a fund management business to complement its private equity operations after that segment was badly hit by the financial crisis, its chief executive said.

CEO Atif Abdulmalik on Tuesday told Reuters the firm plans to manage $10 billion worth of funds within three years and expects to generate half its revenues from recurrent fees earned on managing these funds.

Abdulmalik said: "That (pool) will generate enough recurring fees to offset the risk of living on a deal by deal business."

Arcapita, which had $4 billion in assets as of year end, would launch a $750 million fund focusing on Asian infrastructure over the coming weeks, he said.

The company launched in February a $500 million Gulf property fund together with the investment arm of Saudi Arabia's Al Rajhi Bank.

He said Arcapita's funds portfolio would focus on real estate, infrastructure, venture capital and private equity.

Bahraini investment houses relied on earning up front fees on money they raised for private equity and property deals, a market which was swept away by the burst of the Dubai property bubble late in 2008.

While most of Arcapita's investments are outside the region, its income from placing them with investors in the Gulf dried up last year.

The firm posted a $159 million loss during the quarter ended Dec 31 and said in February it had cut its headcount by about 15 percent in previous months.

Abdulmalik said Arcapita was looking to further cut costs, but not to the same extent as it sees confidence returning to regional investors.

He said: "When I travel in the Gulf, investors are breathing again, because of oil prices, because their portfolios are up."

He said that in particular private investors in oil exporters Saudi Arabia and Kuwait have accumulated liquidity they would look to invest after the summer lull in the Gulf. (Reuters)