A new $2bn infrastructure fund set up by the Saudi Arabia-based Islamic Development Bank (IDB) is targeting investments that will connect companies in the Middle East and Asia.
Muntaz Khan, CEO of Bahrain-based Asma Capital, the company charged with managing the fund, tells MEED he aims to bring Asian investors into the Middle East and take Gulf companies into Asia.
This differs from typical behaviour of private equity firms that will look to just acquire a stake in an existing company. In contrast, this fund will look to structure new projects that bring together investors from the two regions.
He says that approximately 50 per cent of investments will be made in the energy sector, including oil and gas and power. It will also look at potential projects in transportation and social infrastructure.
The fund is IDBs second infrastructure investment, and aims to support up to $24bn in aggregate financing to infrastructure projects in its 57 member states.
It is targeting an Internal Rate of Return (IRR) of 18 per cent, the same target as the previous fund.
Saudi Arabias Public Pension Agency and its Public Investment Fund, as well as Bahrain and the Bruneis ministries of finance, are supporting the programme.
The investment will be one of the largest private equity funds financing projects in the Islamic world. It will be triple the size of the banks first $730m infrastructure fund, launched in 2001 and expected to reach final close in 2015.
Khan says that private equity investors need to start looking beyond the GCC.
It is not sufficient to find a GCC company to invest in. You have to take the company beyond the GCC and make is a trans-regional company, he says.
The funds first investments are at an advanced stage, and due to be completed within the next two to three months, Khan says, adding that the bulk of the investments will start in 2015.
Asma Capital is planning to exit its investments in four to five years.