Investcorp enjoys record year

The alternative assets manager is capitalising on the booming wealth of the Gulf region with a spate of new buyout, mezzanine and growth capital funds and an almost 50 percent increase in client assets.

Investcorp, the Bahrain and London-listed alternative assets manager, has capped a landmark year with a first close of its Gulf Opportunity Fund, the company’s first fund to target investments in its Gulf homeland.

The fund close on $650 million has boosted Investcorp’s private equity fundraising to a record total of $3.4 billion in the year to the end of July, more than double the previous year’s total. This includes its usual deal by deal placement of equity to fund its buyouts.

Investcorp has also grown its capacity to invest by raising its first dedicated private equity fund for US and European buyouts, which has $636 million committed, as revealed by PrivateEquityOnline, earlier this year, with a target of $1.5 billion. It has also closed a real estate mezzanine fund on $108 million.

It has grown clients’ assets under management by 47 percent year on year to more than $9 billion. Its total assets are now at around $13 billion, including $3 billion in co-investments from the balance sheet and $1 billion from affiliates and co-investors.

Gary Long, chief operating officer, told PEO: “We can step up the cheque size. We have added new clients and increased the average ticket size. We are taking advantage of a great investment environment. It is a great time to be focusing on the Gulf.”

He said the company would be resilient in the face of any further deterioration in credit markets because of its transatlantic focus on the middle market and ebitda improvement rather than multiple arbitrage.

“If you disaggregate our returns over the last seven years, two thirds of that comes from improvement in cash flow. We are not looking for leverage as the primary focus of returns,” he said.

The company is hoping to replicate in the Gulf the success it has enjoyed in Europe and the US, where last year it realised $2.2 billion from private equity buyout exits, including car park group APCOA, bed manufacturer Hilding Anders and emergency and sport clothing company Helly Hansen.

Investcorp’s strategy for its Gulf fund, for which it expects to hold a final close of $1 billion by the end of the year, will differ in its target of growth capital investments. Long said: “We are bringing to bear 24 years of investment disciplines, but where we are acting as a bridge investors for example in greenfield developments, importing IP to the region or partnering locally, we will probably take minority positions with board influence.”

Investcorp made net income of $302.3 million for the year to the end of June, more than double the previous year’s $130.8 million. Client assets under management in hedge funds grew 60% during the period to $4.2bn.

Nemir Kirdar, president and chief executive officer at Investcorp, attributed the strong earnings in part to its flotation on the London Stock Exchange which raised $420m last December.