Private Equity / Venture Capital

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Venture Capital the Islamic ideal?

Dear Readers,

Venture Capital has often been regarded as the ideal tool for Islamic finance, particpating in profits and losses of innnovative companies.

Now a major assessment has been done by Cambridge Associates in terms of performance, comparing it to the wider stock market. Result: No outperformance. Considering the lack of liqudity it seems to be much less attractive to professional investors than thought.

See: http://www.cambridgeassociates.com/pdf/Venture%20Capital%20Index.pdf

The lack of success also is induced by lack of transparency and fee models taking away the eventual outperformance. This is for the US market of course. Experiences in less advanced markets could be better or even much worse.

It still has other benefits, as diversifying risk, promoting overall growth and eventuall fostering social benefits.

In order to protect the investor, proper disclosures must be integrated to grow this industry in a healty manner. Further the focus on impact investing will ensure that value is created and risk better managed. What impact investing means could be read here:

See: http://www.thegiin.org/cgi-bin/iowa/home/index.html

Unleashing Entrepreneurship in the Middle East

16th October 13 - 8:00am to 17th October 2013 - 12:00pm
Hosted by the Fung Inst. & Silatech, this conference is the first chance for top thought leaders from the Middle East, Silicon Valley, the Venture Capital community & the academic community to spur innovation, create jobs & encourage entrepreneurship throughout the middle east.

The conference is being generously supported by a donation from Silatech, a Qatar based foundation focused on expanding economic opportunity and jobs in the Middle East. This leading institution is partnering with UC Berkeley to bring in some of the world's top experts in Middle Eastern Entrepreneurship, Innovation, Islamic Finance, Crowdfunding and Accelerators, to discuss the opportunities in the region to develop a thriving culture of entrepreneurship and innovation. This conference will bring together top experts from the region, scholars and venture capitalists and innovators from Silicon Valley to explore how we can work together to create economic opportunity through entrepreneurship in the Middle East.

For more information, please contact Richard Swart: rswart@berkeley.edu

MENA sees increase in number and volume of private equity investments

The MENA Private Equity Association has released its 2012 annual report highlighting the outlook of the private equity industry in the region. According to the report, the sector continued to show signs of recovery in 2012 with investments and exits both registering significant growth. The report also revealed that small and medium enterprises (SMEs) and high growth technology and media companies were one of the most active areas in the industry. On the other hand, private equity had suffered from persistent uncertainty in Europe and depressed fundraising environment in 2012. MENA managers focused in 2012 on enhancing value and exit opportunities for their current portfolios. The report concludes that while private equity activity in some countries remains depressed due to uncertainty, investment in these countries is expected to return to historical levels in the short to medium term.

Venture Capital Bank secures the acquisition of a prime residential development in Central London

Venture Capital Bank successfully secured the acquisition of a prime boutique new-build freehold residential development in Mayfair Chambers, one of London's most eminent residential districts.. This investment opportunity comprises of a building currently being developed to house six luxurious residences. Construction of the development has commenced and delivery of the apartments is expected to be in April 2014. VCBank has been working on this development and investment opportunity for several months. The Bank has engaged Trowers & Hamlins - an international law firm- to conduct a full legal due diligence on the site and offer advice given the new changes in the tax regime addressing matters such as stamp duty land taxes, capital gain taxes, and annual tax on enveloped dwellings (ATED).

Hawkamah reaches out to regional Private Equity players for greater engagement

Hawkamah’s Private Equity Task Force aims to encourage Private Equity firms to appraise or to re-appraise their corporate governance status and to adopt best practice standards. Its remit is to assist the Private Equity Industry in the MENA region by developing corporate governance principles and practice guidelines. Leonardo Peklar, Hawkamah CEO stressed that adopting a better corporate governance culture focuses on adapting the principles to regional cultural requirements and realities. Within this framework, implementing corporate governance positively impacts performance and aligns the interests of stakeholders.

Aston Martin CEO hopes Italian cash to drive sales up

The Italian private equity fund Investindustrial bought a 37.5 percent stake of Aston Martin. The deal was financed via a capital increase agreed with majority Kuwaiti owner Investment Dar. According to the carmaker's CEO Ulrich Bez the transaction will bring money for the next generation of products from 2015 to 2025, as well as know-how and experience. Investindustrial plans to expand Aston's model range and to strengthen its global dealership network.

Kingdom MENA's most attractive PE destination

According to experts from Ernst & Young, Saudi Arabia and Egypt are poised to become the most attractive private equity (PE) destinations in the MENA region. Saudi Arabia is the first in the ranking of the most attractive PE investment destinations in 2011. The reasons for that were the initiatives of the Kingdom's government and its relaxed foreign ownership norms. There are some basic factors such as demographics, the robustness of its financial institutions, a very healthy economic outlook and steady growth which play a key role in positioning Saudi Arabia as a leading PE destination.

Gassner's picture

Outlook & Review 2012/2013

Dear Reader,

Islamic finance had another great year. Many of its market segments progressed, like for example the Sukuk market gaining more maturity. Despite the ongoing debt crisis a good sign of hope and happiness.

Nevertheless we are - as an industry - still not satisfied with the achievements. Islamic finance shall grow stronger in terms of social impact and in terms of substance:

Hence, please allow me to re-iterate my call for participating in international initiatives beyond just our own industry to learn and spread knowledge and experience:

Calling Islamic financial institutions to become member of the United Nations Finance Initiative
http://www.islamicfinance.de/?q=node/811

Inshallah we see more Islamic financial institutions taking a lead in SRI, Social Impact Investing and other approaches while contributing with Islamic finance knowdledge to the conventional industry. The time is now; and there are signs that Malaysia aims for a lead:
http://www.islamicfinance.de/?q=node/4151

Morocco to spearhead Islamic private equity in the MENA region with a US$ 1 billion investment fund

A number of investment professionals united in a collective is planning to set up a US$ 1 billion integrated Islamic finance investment platform in Morocco. This will be made possible by the creation of Sharia compliant financial institutions for the first time in the country, including a private equity management company and an Islamic microfinance organisation. As part of the "1 Million Jobs for MENA initiative", the project aims to provide appealing opportunities for investment. Thus, it is supposed to make its contribution to the high growth employment expectations of the MENA region.

Gulf Arab Private Equity sector picking up: expert

After an investment, which turned out unsuccessful, at the beginning of the ongoing Arab turmoil, there is some positive perspective. A combination of excess liquidity and renewed business confidence has given motivation to new investment activities in the private equity sector. As Shailesh Dash, founder and CEO of Al Masah Capital, explained, the amount of money raised by private equity fund managers in the Gulf region has reached approximately 16.5 billion U.S. dollars in the last 10 years. He further cited two studies by consulting firms Preqin and Bain & Company which found out that private equity firms in the Gulf Arab region are in possession of between 3.8 billion to 5 billion U.S. dollars.

Islamic body to open banks in Mali, Benin

Two new Islamic banks are planned to be opened in Mali and Benin by the Islamic Corporation for the Development of the Private Sector (ICD). The openings are scheduled for next year. The initiative is part of the efforts to expand the industry's consumer base in Africa. According to Khaled Al-Aboodi, the development of Islamic banking in Africa is more important in terms of supplies than in terms of the potentially massive demand. ICD further intends to establish Islamic financial institutions including banks and takaful insurers in Africa. The established in 2009 Tamweel Africa Holding (TAH) is to contribute to the establishment, acquisition and management of Islamic financial institutions in West Africa.

Gassner's picture

Islamic finance title from German translated to Chinese

Dear Reader,

The German language book on Islamic finance by the Editor of IslamicFinance.de and Dr Wackerbeck from Booz Consultants is now translated to Chinese.

Please find the biographical information below:

Authors: Michael Gassner / Philipp Wackerbeck
Title: Islamic Finance – Islam-gerechte Finanzanlagen und
Finanzierungen
ISBN number: 978-7-5139-0217-5
PUBLISHER: Beijing - Democracy and Construction Press
Pre-Publication Date: 2012.7

Full biographical details: http://db.lib.bua.edu.cn/asord/asorditem.php?asord_marc_no=0001344540

Orders: http://www.amazon.cn/%E4%BC%8A%E6%96%AF%E5%85%B0%E9%87%91%E8%9E%8D-%E7%B...

Book review about the German language original: http://www.rpi-virtuell.net/workspace/24686AD5-936C-476D-9EA0-65E2968590...

Best regards,

Michael Gassner

Gassner's picture

Why the lack of profit/loss sharing?

Well, repeatedly we read and hear about the lack of profit/loss sharing (equity finance) in Islamic finance. Here my five cents about it:

1) Islamic commercial law, Fiqh Muamalat, per se has no preference of either permissible mode of finance, be it musharaka, ijara or murabaha whatsoever. All is halal. However, the call for modesty of debt in many hadith and the seriousness of being indebted upon death (withholding of death prayer) shows a call for a solid equity portion in business; let's call it a technical preference.

2) If we look up all debt financing modes (e.g.Murabaha, Ijara) there are remaining difficulties to finance wages, rents and installments on fresh debt. This is a true indicator for a required minimum amount of equity in a company.

3) Point 1) and 2) leads us to demand a sound debt/equity ratio.

Islamic finance job openings October 2012

IslamicFinance.de offers an overview about new job openings of October 2012 herewith - firms aiming to be included please send a job profile/hyperlink to newsdesk@islamicfinance.de - the full details of the advert has to be accessed by the hyperlink below the brief description:

Product Manager, Islamic Banking

Standard Chartered Bank - United Arab Emirates-SCB (United Arab Emirates)
Job Description
?Development of Islamic wealth products across CBMS, insurance and investment streams to create customer value proposition.
?Ensure successful implementation of the Islamic banking strategy across high value segment.
?Concentrated responsibility to work with the Priority/Wealth/Private/SME product/frontline teams and support functions to build on the current Islamic banking capabilities and to create seamless customer experience
?Act as a product specialist for RMs on client meetings to introduce and explain the Saadiq solutions to meet their needs
?Financial budgeting and business forecast. Evaluation of financial performance.

Leeds United takeover: GFH planning full buy-out of Whites

GFH Capital Limited plans to fully buy-out the futball club Leeds United. GFH Capital offers a 100 per cent cash purchase, which means there would be no debt for the club to be paid if the takeover succeeds. Negotiations are protracted as they are about to enter their fifth month but there is more than likely that the deal between GFH Capital and Leeds City Holdings Ltd will be made soon.

See more under: http://www.yorkshireeveningpost.co.uk/sport/leeds-united/latest-whites-n...

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IslamicFinance.de aims to raise USD 2'500 for quarterly running costs

Dear Reader,

IslamicFinance.de is privately funded for many years. Now, for the first time, you have the possibility to make a contribution, from one Dollar upwards!

The technical details, and the money transfer via paypal is organised by Kapipal a new online fundraising tool:

http://www.kapipal.com/islamicfinance

On the blog I gave some more thoughts about Islamic finance media for those interested: http://www.islamicfinance.de/?q=node/3454

Please also note: The fundraising action has a deadline, so act today, not tomorrow and tell your friends about it!

All donors who will leave a message will be listed in the article, which follows after closure of the fundraising period.

I am happy to meet you in person either on 19th March in Milano (http://www.islamicfinance.de/?q=node/3396) or on 10th May in Frankfurt (http://www.islamicfinance.de/?q=BAFINII) at the respective Islamic finance conference.

Wa at Taufiq min Allah, all the best,

Michael Saleh Gassner

Gassner's picture

Islamic finance media - a challenge, and what one could do

Dear Readers,

Islamic finance media are a tricky service. This is true for various reasons: The Internet eats up the revenues, because everything ought to be free. Islamic banks are still a niche phenomena, and international banks like UBS or Deutsche are almost as large as the entire global Islamic finance industry. Consequently the marketing budgets are much lower, too.

Last not least, who should advertise? The banks among themselves or to the clients? Advertising from bank to bank, does usually not make much sense, but real client oriented formats are hard to find, too. May be this is a niche. Others, who could finance Islamic finance media are basically the service providers to the banks, but due to the limited number of Islamic financial insitutions, direct marketing, e.g. face to face meetings will be preferred.

This in short is the background why Islamic finance media are not so well established in terms of journalism and research, but mostly reflecting the press release as criticised by the makers of the Islamic Globe. See: http://www.theislamicglobe.com/index.php?option=com_content&view=article...

QATAR TECH INVESTMENT POWERHOUSE GOES TO FRANCE

A NEW BREED OF TECHNOLOGY & DESIGN INVESTMENT HOUSE TO BE LAUNCHED AND SHOWCASED PARIS, JULY 2012

Qatari Aurum will be launching its first large-scale foray into the world of Technology and Design during an annual gathering of other GCC-based investors and private equity houses in Paris during July this year. The newly¨established group, comprising high net-worth venture capitalists from Qatar, is yet to launch formally but has already set about making waves in an industry reserved for Silicon Valley start-ups and traditionally large-scale US private equity houses. It is expected that the Group will announce its inaugural acquisition of equity in a globally established internet start-up at the Capital & Projects Exchange, Paris, France, July 2012.

The focus of the group is toward bringing a wealth of technology know-how in the internet media and software design services to the GCC region. There is a course laid out to use this investor insight in gathering the choicest design and development houses locally within the region and injecting them with world-class expertise, fuelling a technology-drive unsurpassed in recent times.

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