Big boys of sovereign wealth fund banking

Big boys of sovereign wealth fund banking
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First Published: Fri, Apr 25 2008. 10 28 PM IST
Updated: Fri, Apr 25 2008. 10 28 PM IST
There used to be a time when investment banks would send their mediocre talents to rattle around West Asia. Yet with Western markets on the brink of recession and oil at $117 (Rs4,703) a barrel, this cash-rich region is rapidly becoming a top hang-out for the global financial elite.
The great sovereign wealth fund, or SWF, rush has spawned a host of new roles. Barclays Plc. recently appointed its top earner Roger Jenkins as chairman of investment banking and asset management for West Asia. Earlier in the year, Morgan Stanley pushed David Law, its former head of private equity, into a similar position. Lehman Brothers Holdings Inc. is the latest to join the bandwagon having just named Makram Azar its global head of sovereign funds.
We take a look at the existing stars and their various skills in the who’s who of SWF banking.
It sounds like a new trend, but cash-starved western companies have for decades been tapping the Gulf for funds. Nemir Kirdar, 71, executive chairman and chief executive of Investcorp Bank, was the first to channel Gulf family capital into the West—earning him a reputation as the godfather of SWF banking. The former JPMorgan Chase and Co. banker, who escaped Iraq 50 years ago and arrived in New York virtually penniless, founded the Bahrain-listed private equity house in 1982 with the financial backing of prominent Gulf businessmen.
Kirdar was the first to use petrodollars to recapitalize iconic brands, including Gucci and Tiffany’s.
Tareq Abdul Meguid, known as Terry in the West, copied the trick when he quit Morgan Stanley two years ago to help set up Perella Weinberg Partners LP. The Irish-Egyptian was instrumental in securing the boutique investment bank’s $1 billion start-up capital.
Meguid, with over 25 years experience in the Gulf, drew in at least three of the group’s 10 founding investors, including the Gulf Investment Corp., Dubai’s private equity style sovereign wealth fund Istithmar and the Qatar Investment Authority. He also advised Istithmar on its investment in hedge fund GLG Partners and the Kuwait Investment Authority, or KIA, on its estimated $3 billion investment in Merrill Lynch and Co. Inc.
Since then, a string of banks and funds have turned to sovereign entities to bulk up their balance sheets. China Investment Corp.’s (CIC) disastrous $3 billion pre-initial public offering punt on private equity group Blackstone Group Lp. is arguably the most notorious. While CIC may be desperate to forget the deal on which it has so far lost half of its investment—for Anthony Leung, senior managing director of Blackstone, the deal was a remarkable comeback, after spending an unfortunate spell as Hong Kong’s deeply unpopular financial secretary.
Indeed, Leung’s extensive Chinese connections also bagged him a role advising China Development Bank on its $3 billion stake in Barclays during the British bank’s failed bid for Dutch bank ABN Amro.
However, it wasn’t until sovereign funds came to the rescue of Western banks hit by the subprime mortgage crisis that they really started to create waves. The headliners are a selection of bankers who’ve stamped their names all over the $60 billion of deals that may or may not be one-offs.
Michael Klein, chairman of institutional clients at Citigroup Inc., was the first to secure a deal. The Abu Dhabi Investment Authority’s $7.5 billion stake undoubtedly encouraged other sovereign funds to commit to similar deals elsewhere. In two rounds of fundraising, Klein also brought on board the Government of Singapore Investment Corp. and KIA.
Similarly, Wei Christianson, chief executive of Morgan Stanley in China, was crucial in bringing in $5 billion from CIC. Her high standing in Chinese business circles, where she has held similar positions at Credit Suisse Group and Citigroup will be crucial to the bank’s relationship with CIC.
Independent super-boutique Lazard took the stack of advisory fees. Deputy chairman Gary Parr came up trumps, advising CIC on Morgan Stanley and the KIA on Citigroup. Yet Parr’s success says little about his sovereign connections. At least once Parr is understood to have been brought in to give advice before being informed of the client’s identity.
It’s unusual for sovereign funds to exclusively do business with just one bank, yet Gavin Wilson, managing director of investment banking for Goldman Sachs Group Inc. has up until now acted as a personal advisor to Mubadala Development, the strategic investment arm of the Abu Dhabi government. A combination of sector expertise and regular contact helped Wilson win roles advising on the acquisition of 7.5% of Carlyle Group and 5% stake in Ferarri SpA.
In a sphere where business is often completed at the highest level, it pays to speak Arabic and be well connected. The concierge may not stamp his or her name all over specific deals, but without this gatekeeper it’s certainly more difficult to get anything done.
Yigit Arslancik, a former director in Citigroup’s financial entrepreneurs group, advised on the flotation of Saudi Prince Alwaleed’s Kingdom Holdings. The Turkish banker has good relationships with private equity style sovereign funds, particularly Dubai International Capital and Istithmar, whom he advised on the buyout of toy-retailer Barneys New York Inc.
Ghassam Abdul Karim, JPMorgan’s head of Middle East and North Africa previously spent nine years building Goldman Sachs business in the region. The British-Lebanese banker, based in London, advised DIC on its buyout of German chemicals group Almatis GmbH.
And finally, Georges Makhoul, Morgan Stanley’s managing director of the Middle East and North Africa, may only have been based in Dubai since 2005 but it has been plenty of time for the Lebanese banker to get his foot in. Indeed many of the region’s funds have only come into existence during this time. Fluency in English, French and Arabic have helped.
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First Published: Fri, Apr 25 2008. 10 28 PM IST