What Investors Need to Tap the Middle East’s Well of Wealth

For asset managers, the Middle East is the place to be.

Funds seeking capital can pitch their strategies to some of the world’s largest sovereign wealth funds and family offices, which collectively manage billions in assets. Managers seeking a geography with growth potential and limited competition are increasingly spending time in countries like the United Arab Emirates.

But operating in the Gulf is not the same as working in New York or London, warns Viraj Sawhney, head of Middle East private equity at Warburg Pincus.

The region “feels more like the East than the West,” said Sawhney, who lived in Asia before settling in Dubai. At SuperReturn Middle East – a private conference held in the UAE’s largest city – he stressed that local credentials and long-term relationships matter more than flashy PowerPoint presentations.

Trading and fundraising are relationship-driven, according to money allocators and investment professionals.

“So many GPs come in for a day and expect a check-up at the end of the day,” Awaiz Patni, chief financial officer of a Saudi Arabia-based family office, said at the SuperReturn conference.

“The money will only come if you build a relationship,” he said.

Offices are not necessary, but you must travel to the location

Millennium, Brevan Howard, Schonfeld and ExodusPoint are just some of the hedge funds that have opened offices in Abu Dhabi or Dubai. Many funds have also been mobilized to open offices in the region because their employees want to live there, thanks to the tax-free status and the warm climate.

A local fundraiser for emerging hedge funds in Dubai, who spoke anonymously because his company does not allow them to speak publicly, said the idea that the region’s sovereign wealth funds require a physical office to obtain capital is wrong.

Indeed, Mark Oshida, regional head for the Middle East and Africa at consultancy Cambridge Associates, said his firm has had many major sovereigns among its clients for years, but they have never pushed the organization to hang a shingle in the country.

Oshida, who moved to Dubai in April, said the organization decided to have a physical presence once it began working with more local family offices, many of which were run by Europeans or Asians who moved to take advantage of tax benefits.

While a real office isn’t necessary, fundraisers and investors in the region both say getting money and closing deals in the Middle East requires more than a Zoom call.

“You have to be present, physically present,” Sawhney said.

Charles Myers, founder of research firm Signum Global Advisors, who splits his time between New York and London, began his Wednesday speech at the AIM summit in Dubai by noting that it was his fifth visit to the Gulf this year.

Some would prefer to simply relocate to the region rather than constantly taking flights from Europe, Asia or the United States, especially if it is a priority for their business in the future.

“Our deals here take longer than elsewhere,” said Taimoor Labib, founding partner and head of MENA for private equity manager Afirma Capital, at SuperReturn.

Max Burke, a director at Actis who moved to Dubai from London, is a private equity investor focused on infrastructure projects such as data centers. He believes there are many opportunities in the Middle East, but warned at the SuperReturn conference that negotiators should prepare for many breakfasts, lunches, coffees and dinners.

Learn the culture

Learn to love coffee – which, if traditional, is served unfiltered in a dallah coffee pot – if you come to the Middle East.

Although alcohol is now legal and sold in some parts of the region, such as Dubai and the Qatari capital Doha, business has been done around coffee for centuries, several residents said.

“You have to look at the region from a cultural point of view,” Khalil Chami, chief financial officer of Ali & Sons, a Dubai-based conglomerate that also invests through international asset managers, told SuperReturn.

“If you’re just here for a transaction, we can tell,” he added.

Even in a westernized city like Dubai, traditions matter. SuperReturn deployed an Arabic coffee cart for attendees. A fundraiser for an international company, who lives in London and asked to remain anonymous, said they also make a point of telling every Middle Easterner they meet that they buy coffee from the region to bring home to their families.

The long delays in making decisions aren’t just due to a desire to frustrate visitors, several residents said.

“We want to see if your values ​​align with ours,” said Patni, the family office head.

When a region has as much wealth as the Middle East, it attracts a certain class of crooks and dreamers who get rich quick. Spotting scammers is just as important as finding a good opportunity, Chami said.

Warburg’s Sawhney said the three values ​​people looking to do deals in the region should keep in mind are patience, flexibility and humility.

“We don’t see all three present all the time in the West,” he noted.

And of course, “get used to Arabic coffee,” Chami said.