Investcorp to drain fund; start new one

Gulf Opportunity Fund I, the $1 billion private equity fund of asset management firm Investcorp, expects to make five or six transactions in the next two years. Investcorp is also considering the launch of another fund, according to a top executive. The Gulf Opportunity Fund has already completed five transactions worth around $500 million since it was opened in 2007.

(Reuters) – Asset management firm Investcorp’s $1 billion private equity fund expects to make five to six transactions in the next two years as it seeks to deploy remaining part of its commitments and is mulling the launch of another fund, a top executive said.

The fund, named Gulf Opportunity Fund I, has already completed five transactions worth about $500 million since its inception in 2007, in sectors ranging from consumer goods and services to logistics, distribution in the infrastructure space and energy-related businesses.

“We have a strong pipeline. Based on broader base of deal flow, I believe we’ll invest $400 million to $500 million in the next 24 months,” said Azmat Taufique, a managing director and co-head of its Gulf Growth Capital business, the firm’s private equity arm in the region.

Investcorp may also launch another fund in the next 18 to 24 months though there are no immediate plans, Taufique said. “$1 bln was the minimum for first fund, and we’d like to grow. It’s (a new fund) unlikely to be under $1 billion but whether more than that is difficult to tell,” he said.

The global financial crisis dealt a big blow to Middle East private equity as deals dwindled and investors shied away but signs of a revival are increasing hopes that the half billion dollar industry will bounce back.

Private equity investments in the region plunged 80 percent to $561 million in 2009, Gulf Venture Capital Association data showed recently.

“Yes, there was a significant slowdown in PE deals in 2009 compared to say 2008. But in the last two years, we have completed five transactions which from any perspective is not a bad track record for us to be setting,” he said.

The Bahrain-based firm, which once floated luxury brands Gucci and Tiffany ,invested about $98 million in October 2008 in Redington Gulf, a distributor and service provider of IT and telecom products in the region.

Some of the firm’s other investments include a stake in Middle East gold and jewellery manufacturer L’azurde and a 20 percent stake in Gulf Cryo, a manufacturer of industrial, medical and specialty gases in the Middle East.

The fund may begin to look at exit options for some of its investments in the next 12 months, Taufique said, adding that he was looking at a range of options, including initial public offerings (IPOs) as a mode of exit.

Investcorp suffered its first full-year loss in 2008/2009 as the financial crisis hit its hedge funds business and portfolio companies.

Like a number of Bahrain-based investment houses, it had to raise over $500 million in new capital last August.

(Reporting by Dinesh Nair, Amran Abocar, Rachna Uppal and Jason Benham; Editing by Hans Peters)