(MENAFN- Gulf Times) Investcorp Bank, the Bahrain money manager whose founder is stepping down after three decades, is planning to rebuild its hedge-fund business and move back into European real estate.
Best known for taking luxury brands Tiffany & Co and Gucci Ltd public under founder Nemir Kirdar, Investcorp may also seek to shift its private-equity operations to larger transactions in the US and push into Asia as its new management tries to boost growth, which stalled in the financial crisis.
Investcorp's appointment of Mohammed al-Shroogi and Rishi Kapoor as co-chief executive officers in April and its focus on new businesses come amid rising competition as wealthy Middle East families are courted by global and regional fund managers. That is a marked difference from the landscape when Kirdar started the firm 32 years ago at the initiative of the Arab Monetary Fund to invest wealth created by oil-exporting countries. It now manages about $10bn, down from $17.6bn in 2008.
"Staying stationary is not an option," Kapoor, Investcorp's chief financial officer, said in an interview in the company's opulent Grosvenor Street office in London. "Evolution is the name of the game,"
Kapoor, 48, and al-Shroogi, 62, who runs the Gulf business, take over July 1 as part of a generational shift at Investcorp. Kirdar, 78, executive chairman and CEO, will become chairman, replacing the retiring Abdul-Rahman Salim al-Ateeqi, who has been chairman since Investcorp was founded in 1982. Mohammed al-Ardhi, 54, succeeds Kirdar as executive chairman.
Kirdar was the first banker in the region to channel Gulf capital into Western companies and real estate through Investcorp. The firm made its mark quickly with a series of US investments including Saks Fifth Avenue Inc and Circle K Corp convenience stores and for several years was the only regional alternative for rich Middle Easterners looking to invest abroad.
"Nemir was a visionary leader who recognized the potential of the Middle East as a source of global capital long before anyone else," said Johannes Huth, 55, head of European private-equity at KKR & Co and an Investcorp alumnus.
Kirdar said he is leaving behind an organisation "that needs leadership from the top," adding that new initiatives should be introduced carefully and gradually. "Each should be done the same way we did the current products," he said. "It's really earning the trust and the confidence of the client that we are after."
The global financial crisis in 2009 forced Investcorp to raise $500mn in preference share capital to reinforce its balance sheet as clients fled and hedge-fund assets fell by half. The next year it cancelled a secondary offering in London, which had been designed to increase liquidity and raise its global profile.
Investcorp is looking to rebuild the hedge-fund business, which oversees $4.8bn, down from a peak of about $8bn before the crisis. Chief investment officer Savio Tung, 64, has cut costs, hired Lionel Erdely from Lyxor Asset Management and added products beyond its primary fund-of-funds model where the money of institutional clients is given to other asset managers.
Last year, the firm made $28.2mn in profit on hedge funds on asset-based income, where it uses money from its own balance sheet, which is then co-invested with client money. That was up 10% from a year earlier, a performance Tung puts in the top quartile.
"I have to be honest, four years ago was horrible and the team lost their confidence in terms of picking managers, in terms of investment analysis and the organisation was bloated," Tung said.
Investcorp is also considering a move back into European real estate, which it abandoned in 1994 because of low returns.
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