Interview: Abdulla bin Fahad bin Ghorab Al Marri
Is the current economic environment in the Gulf impacting the way private equity is managed?
ABDULLA BIN FAHAD BIN GHORAB AL MARRI: The sharp drop in oil prices and volatility in the equity markets have had an impact on the private equity industry in two ways. First, this macro environment has limited the exit options for existing investments through initial public offerings and market listing, as investor confidence is low and there is lower-than-normal appetite for risk. Second, as liquidity in the market is tight, it paves the way for investment opportunities to surface at attractive prices, offering opportunities for investors to make sound returns during the recovery period. Our investment strategy is focused on sectoral and geographic diversification; most of our portfolio companies are not directly exposed to the oil and gas sector, so they are still performing well. Sectors like health care and food and beverages are defensive in nature, and continue to benefit from positive demographics.
What is being done locally to encourage the development of sharia-compliant private equity?
AL MARRI: Due to its proven ability to weather economic fluctuations and instability, Islamic finance has grown rapidly in popularity since the economic crisis of 2008. The premise of sharia principles centres on sharing of risks and profits, prohibiting riba ( interest), and securing financing by assets. As a result, we believe that Islamic finance solutions will continue to grow in demand as investors perceive sharia models as a safer alternative than conventional banking.
Furthermore, Islamic finance guidelines prohibit investment in financial instruments that triggered the previous financial crisis (such as derivatives and toxic assets), so its growing popularity enables us to build a more sustainable and stable economy. Therefore, in order to achieve what we believe to be the full potential of private equity investment, we need to focus on innovation. Qatar can lead the way in this respect. I encourage the Qatar Financial Centre (QFC), as a leading centre for finance, to play a focused role in further developing asset management, family offices and takaful (Islamic insurance). As a leading sharia-compliant bank licensed by the QFC Regulatory Authority, QFB can contribute in this regard.
Will reduced revenue increase the appetite for mergers and acquisitions (M&A)? Which areas would be key candidates for consolidation?
AL MARRI: The liquidity crunch and prevailing challenging market conditions will increase M&A activity, specifically for players that are financially resilient and have experienced investment teams capable of sourcing opportune investments. Every economic downturn generates attractive consolidation opportunities and often, in search of relative stability, investors turn to trusted, quality advisors. We launched QFB in 2009, during the last financial crisis, and our financial strength and expert team enabled us to source depressed investments that were very profitable for us when the economy recovered.
Given the regional impact of the recent interest rate rise by the US Federal Reserve, how do you expect any further changes to affect the market?
AL MARRI: The rate rise is in line with market expectations. Since the start of 2016 markets worldwide have been volatile and local markets have been badly hit. The fall in commodity prices and the reliance of Gulf countries on oil and gas as the prime source of revenue could potentially create a negative situation, but I believe that Qatar is in a stronger financial position than many Gulf countries. We are able to withstand short-term economic shocks due to the government’s focus on diversification. It could lead to privatisation for some public entities and services, generating opportunities for private equity in the region, and a greater reliance on the private sector.
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