Opportunity knocks

Shahzad Shahbaz, CEO of QInvest speaks about the investment bank’s future growth ambitions.
Opportunity knocks
By Tom Arnold
Fri 19 Jun 2009 04:00 AM

Shahzad Shahbaz, CEO of QInvest, is pinning the investment bank’s future growth ambitions on the launch of four funds to snap up distressed assets and capitalise on the downturn.

As once cautious investors return tentatively to global stock markets, among those first in the queue will be Shahzad Shahbaz, CEO of QInvest, Qatar’s largest investment bank.

Some of the values and opportunities that are available today are quite attractive as long as you have a long-term view.

Resting on Shahbaz’s experienced shoulders is the responsibility for overseeing four investment funds, including a $250m private equity fund, set to be launched by QInvest before the end of the year. And amid the carnage wreaked by the global financial crisis, Shahbaz believes that there are bargain assets to be found.

“Our view is that some of the values and opportunities that are available today are quite attractive and, as long as you have a long-term view, this is a good time to invest,” says the veteran, who spent 25 years at Bank of America before moving to the Gulf.

One of those opportunities arose last month when QInvest, which has an authorised capital of $1bn, of which half or $500m is paid-up, took a 44 percent holding in UK-based stockbroker Panmure Gordon.

Flexing its considerable financial muscle, the bank won a three-way bidding war to invest $36.3m into Panmure Gordon; a move which raised QInvest’s profile on the international stage.

Aside from the private equity fund, QInvest plans to launch a fund for listed equities, a specific sector fund and a ‘special opportunities’ fund focused on different asset classes.

Three of the funds will be focused on the Middle East, Africa, South East Asia and Turkey, with the specific sector fund invested globally. QInvest plans to jointly invest with its clients in the funds, the sizes of three of which have yet to been decided.

“The private equity fund will be invested in multisector, well-established companies,” Shahbaz explains. “We are looking at listed equities too, as we think that there are some good values.”

The specific sector fund will be invested in a market area that has been “overly depressed” by the impact of the global financial crisis but Shahbaz refuses to reveal which sector that would be.

The special opportunities fund will be invested across several asset classes including mezzanine debt, convertible bonds and sukuks, he says.

The foray into global markets represents the first serious investment activity by QInvest under the stewardship of Shahbaz, who has overseen a period of spending restraint by the bank.“We have been waiting and seeing for the past seven months to see where the best values are,” says Shahbaz, whose experience should stand the firm in good stead.

He joined QInvest in September last year from Emirates NBD Group where he was CEO of the investment bank. Prior to that he was at Bank of America in London as head of regional investment banking for Europe, Middle East, and Africa.

People still have unrealistic expectations when it comes to revenue on private equity, and so not a lot of deals are being done.

Established in 2007, QInvest is regulated by the Qatar Financial Centre Regulatory Authority (QFCRA). Its principal shareholders are Qatar Islamic Bank, which owns 25 percent of the investment house, and Bahrain-based Gulf Finance House, which owns a further 15 percent.

The rest of the business is owned by a combination of both institutional and private investors from Qatar and other Gulf Arab countries including Bahrain, Kuwait, Oman and the UAE.

Despite QInvest for the most part keeping its powder dry during the recent economic turmoil, it has not escaped completely unscathed from the plunge in asset values across the globe.

The investment bank has seen 10 percent shaved off the value of its European real estate portfolio following the slump in international property markets.

The firm holds an 80 percent stake in the London Bridge Quarter development, which includes the famous ‘Shard of Glass’ new London Bridge Tower, one of the UK capital’s most high-profile skyscraper projects, which last year was valued at $3.88bn.

In January last year, it headed a syndicate of Qatari investors including Qatar National Bank, Qatar Islamic Bank and Barwa Real Estate to back the development. In addition, the Qatar Financial Centre-based bank also holds a substantial commercial property portfolio in Paris.

Asked about the impact of the property market decline in recent times, Shahbaz, says: “It has affected the valuations, particularly in Europe, but not a very significant impact given the nature of the investments that we have.

“For the time being we’re not looking to add to our real estate investments but real estate is a sector we are interested in.”

QInvest’s real estate portfolio, which represents about 35 percent of the company’s assets, also includes investment in Al Waab City, a $3.3bn project under development in the Qatari capital, Doha.

In November QInvest led a consortium made up of Qatari Diar and Barwa Real Estate, which took a 2.98 percent acquisition of the capital of French environmental services firm Suez Environnement.Aside from those investments, Shahbaz spent the first months of his tenure “filling out” QInvest’s management team. This was completed in April with the appointment of Philippe Jouard as head of origination, while Rommie Bhutani and Anuj Khanna joined as co-heads of principal investments.

“When I joined, QInvest was already set up but there were some changes we made in the organisational structure, we streamlined a few things, some people were changed and some people were brought in,” Shahbaz explains. “But most of the hiring has been about filling out the front office to execute our strategy.”

This strategy involves the firm becoming a “major player” in a region that Shahbaz defines broadly as the Middle East, Africa, South East Asia and Turkey. Specifically, QInvest aims to rank among the top five firms in terms of market share across four business areas, within three to five years of its launch.

Businesses in two of those sectors are already established, namely investment management, which involves co-investing in with investors in portfolios, and investment banking, including arranging financing or providing advice to clients based on merchant banking models.

The investment bank also plans to launch institutional brokerage across a pan-regional platform and private client services, involving managing investments of “ultra high net worth individuals”.

“These last two are something for the future and we will not do before the end of this year or early next year because we think we have quite a lot on our plate already with the first two businesses,” admits Shahbaz.

Hand-in-hand with QInvest’s regional growth is Shahbaz’s ambition to open up international offices outside the bank’s headquarters in Doha.

“In the big economies my view is that you need to be on the ground with a presence to be regarded as a serious player,” he says. “We haven’t as yet decided which markets but certainly in some of the larger countries like Saudi Arabia, India and Turkey we want to focus and develop our businesses.”

But the most immediate focus for Shahbaz is the four funds, which aim to take advantage of the turbulence afflicted on global markets. Indeed, Shahbaz has advice for those investors still sitting on the sidelines waiting for clear signs of a “bottoming out”.

“We don’t necessarily see it as ‘at which point does a turnaround or bottoming out come’, but more as a medium to long-term strategy,” he insists.

“People still have unrealistic expectations when it comes to revenue on private equity, and so not a lot of deals are being done. But we think that right across a broad range of asset classes there are some very good investment opportunities.

“People who’ve been successful in private equity in this part of the world, a lot of it had to do with timing. They went in at the right time and the markets went up.”

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