Abu Dhabi Financial Group (ADFG), a UAE-based alternative investment firm, has a short history of existence and yet has built up a rich deal-making record. It has grown from having $100m in assets under management in 2011 to a portfolio of investments worth more than $5bn today. ADFG has also achieved an internal rate of return of 27 per cent in about 50 investments.

Jassim Alseddiqi, CEO of ADFG, is now looking to the next phase of the company’s development. “I think 2017 is going to be a year of growth, but having said that it will be a year of consolidation as well for different ADFG assets and partnerships,” he says. “We need to take a step back and see how we can laser-focus on portfolio entities and make sure they are competitive, efficient and contributing to the growth of ADFG as a group.”

ADFG targets alternative investments as it believes they offer more value and higher returns compared with conventional investments. High-net worth individuals, family businesses and local, regional and global institutions make up its investor base.

Shuaa Capital

ADFG operates as an independent entity and through six operating companies. The consolidation plan is already in action and it seems Shuaa Capital, a Dubai-listed investment bank, is going to be the platform for Alseddiqi’s aim of creating a lean and efficient investment group.

Shuaa, in which ADFG bought a 48.36 per cent stake in November, announced in March that it is entering an agreement to acquire Integrated Capital and Integrated Securities from Integrated Financial Group, a unit of ADFG.

Alseddiqi has even bigger plans for Shuaa: he has set a three-year target to help the firm reclaim its leadership position in financial services and investment banking in the region. “It will be a revived legacy from the past,” he says.  

Shuaa fell on hard times after the 2008-09 financial crisis, but is now looking to forge new partnerships in the GCC. The firm is eyeing a merger with a larger regional financial institution and Bahrain’s GFH Financial Group, in which ADFG is the largest shareholder.

The flurry of deals for the group companies, especially Shuaa, which bought a 14 per cent stake in GFH subsidiary Khaleeji Commercial Bank, is expected to continue as the firm expands its portfolio of products and services in the Gulf and wider Middle Eastern markets.

“For Shuaa, the focus is going to be on the UAE, Saudi Arabia and Egypt,” says Alseddiqi, adding that Saudi Arabia, the largest Gulf economy and the biggest banking and finance market, is a priority for the investment bank.

Property fund

Shuaa already has a presence in the kingdom through its subsidiary Shuaa Capital Saudi Arabia. It is running a property fund with investments in three hotel projects, with one property up and running and the second to be completed soon. The third hotel will be finished next year.

Shuaa has already successfully raised SR1bn ($267m) through another closed-ended real estate investment-focused fund and will make the formal announcement of the new fund in April.

The Saudi expansion plans will also see ADFG launching a real estate investment trust (REIT) through the Shuaa platform, says Alseddiqi. The size of the REIT could be slightly less than SR1bn and its listing on the Saudi Stock Exchange (Tadawul) is envisaged in the fourth quarter of this year.

ADFG as a group does not have plans for a public flotation, but will consider opportunities to list some of its investment vehicles, Alseddiqi says. The group is looking to raise AED500m ($136.2m) from an initial public offering of one of its own funds on a UAE exchange. “It’s a REIT and Shuaa is working on that as lead manager,” he says.  

The size of assets under management of the investment trust are about AED3bn and the listing could happen as soon as this year.

In terms of acquisitions at the group level, ADFG is not actively seeking deals this year.

“Because of our size of assets under management, we might not need an acquisition,” he says. “If we are looking for an acquisition, it has to be the size of us or more, so there is nothing on the horizon. The plan is that each operating company will be acquiring, depending on its needs and the area of its focus.”

While Alseddiqi does not rule out an acquisition outside its core markets if it makes sense for the group, the focus for now is on Middle East markets, which he says are the most fertile in terms of investment openings.

“In 2014, investors left the region alone as it was too hot to buy into, but today it is the best in terms of investment opportunities,” he says. “We typically follow cycles and in the current times of distress we like this region.”

ADFG is even willing to tap the debt markets or go to its core investors for additional funds if it sees a large deal worth pursuing.

“If there is a quality transaction that requires even $1bn, we will consider it,” says Alseddiqi, adding that historically, the “sweet spot” for ADFG has been between $50m-$300m. “Quality and not size is our main objective,” he says.

Target markets

Within the broader region, the UAE is the most attractive market for the investment group, followed by Saudi Arabia, Egypt and Morocco.

With a sharp decline in oil prices, the hydrocarbons-dependent economies across the Gulf region have suffered, but Alseddiqi says the “distress” is not very visible in Saudi Arabia despite a slowdown in the pace of economic growth.  

“There is no fire sale [of assets],” he says, adding that investment proposals from firms such as ADFG in the past were not even “entertained, but that has changed today and you do get entertained at least” in the kingdom.

Alseddiqi says ADFG is eyeing deals that could arise as Saudi Arabia implements its National Transformation Programme, particularly the planned privatisation of state assets and the outsourcing of the operation of healthcare facilities to the private sector.

“They are going at a fast pace and the deals will come to the market soon,” he says.