The private equity firm has faced questions from investors about how their money was used
Private equity company Abraaj has offered to resign as manager of its $1 billion healthcare fund following allegations that it misused investor’s money.
As part of the proposed plan, Abraaj would swap places with an interim manager and then with a permanent replacement, according to the Financial Times.
Other options discussed allegedly include turning the fund into a company or a self-governing fund.
The Dubai-based firm held talks last week with some of the investors who had raised concerns that the money wasn’t being used for its stated purpose, according to people with knowledge of the matter.
Earlier in April, the Dubai-based Abraaj hired investment bank Houlihan Lokey Inc for assistance in negotiations with investors.
Abraaj, which in February conducted an internal review and concluded that money in its health fund had been properly accounted for.
In a statement to Arabian Business today (Wednesday), Abraaj said it was never instructed to return capital, insisting that it was done so voluntarily, but agreed that it has halted fresh investments temporarily, as it reorganises its structure - with founder Arif Naqvi ceding control of the fund management business - and plans to introduce new internal controls.
“Abraaj has voluntarily released investors from their commitments in Abraaj Private Equity Fund VI, and no longer intends to proceed with this fund in its current form," the statement said.
"In light of our ongoing re-organisation, we believe this is a prudent step and is aligned with our longstanding commitment to investors. Abraaj will restart fundraising discussions with investors once the re-organisation and strategic review are complete. We appreciate the continued support of our investors, and we will continue to actively engage with them throughout this process.”
It cut about 15 percent of its total workforce in March and is seeking to sell a stake in the funds division to raise cash amid heightened regulatory scrutiny and the departure of key executives.
The Bill & Melinda Gates Foundation, the World Bank’s International Finance Corp. unit, CDC Group and Proparco Group had hired a forensic accountant to examine what happened to some of their money in the health fund, the Wall Street Journal reported on February 2, citing people familiar with the matter.
Abraaj said a discrepancy between the amount of money requested from the investors and what was invested was because of delays in some projects, according to the newspaper.