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|| London and Moscow hedge funds launching PE funds targetting Middle East investors

silk-pharos.jpgIn two separate announcements in the past week, two hedge funds announced launching private equity funds this year targeting Middle Eastern investors.

The Moscow-based Pharos Financial Group announced it will launch two private equity funds this year in joint venture with Dubai-based Miro, each of which is targeted to raise $350 million. One is an agriculture fund focused on Eastern Europe and Africa and other is a timber fund. It expects to raise more than 50% of the capital for its agriculture fund from the Middle East.

The London-based asset management firm Silk Invest announced it will launch a $150 million private equity fund to invest in South African food sector and expects to raise over one-third of its assets for the new fund from the Middle East.

More details from their releases follows

Pharos Financial Group will launch two private equity funds this year, each of which is targeted to raise $350 million (Dh1.28 billion), a senior company official said yesterday.

"We have two PE funds in joint venture with Dubai-based Miro; one is an agriculture fund focused on Eastern Europe and Africa and other is a timber fund. The agriculture fund is expected to be launched with our first closing in the next 60 days while the timber fund by July.

"Additionally, we have an oil and gas private equity project, which focuses on Russia and former Soviet Union, which may include other regions of the world such as North America," said John J Papesh, Managing Director, Pharos.

The company expects to raise more than 50 per cent of the capital for its agriculture fund from the Middle East. The changing economic climate is clearly reflecting in increased investor confidence and the company is seeing increased interest, he said.

"Investor appetite is definitely stronger and has increased. People are still very cautious, prudent and pragmatic, and they are evaluating investment opportunity. But they are definitely looking to making investment choices and allocations. I see there is a remarkably increased level of activity. I am optimistic and feel that things are definitely improving," said Papesh. He said the firm is also planning a private equity project involving oil later this year.

"It may or may not be a fund as there are lot of investors interested in direct equity stakes or partnerships in a company structure. It depends on preferences from investors. While small institutional investors prefer funds, the large ones like to go through company structure."

In the long term, he said, "we are looking to expand, we may over the time be launching a new Mena fund, which is expected to be welcomed by Western and GCC investors".

The company, which opened its office in Dubai in 2008, said its presence in this region "has been a very good decision".

"Dubai is an important strategic part of our growth. Having exposure and being in the region, we are able to be in contact with investors from the GCC,'' said Papesh.

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The United Kingdom-based asset management firm Silk Invest will launch a $150 million (Dh550.9m) private equity fund to invest in South African food sector, its senior executive told.

The fund expects to raise over one-third of its assets for the new fund from the Middle East.

"We target our first close of at least half of these assets by June this year," said Zin Bekkali, CEO of Silk Invest.

The asset management firm has an Arab Falcons Fund that invests in quoted equity securities in Arab countries, apart from two other funds.

He said Middle East investors had a preference for private equity funds.

"Traditionally investors here have liked instruments with higher returns. We think the food fund would be quite interesting for them. We expect one-third of assets out of this region. There has been interest from institutional investors and families that are into retailing."

Bekkali said the firm had seen a 50 per cent year-to-date growth in assets and was growing fast. "The change in investor behaviour is noticeable. But I'd call it the initial state where they have started to put money in their local markets. There is diversification in terms of sectors but it would be by the second half that we would see investors investing outside their markets."

In terms of sectors, telecom, logistics and food were attracting interest. Africa was largely untapped market and held huge potential.

Arab and African markets, Bekkali said, offered attractive valuations.

"Emerging markets continue to stay important. However, while India, China and Brazil are almost back to previous levels, in case of Africa and Arab markets, they are still at a valuation discount of 40 to 50 per cent. This makes them attractive," he said. Bekkali said the first quarter of this year has shown that these markets outperformed the emerging markets index. Talking about South African Food Fund, Bekkali said the company would invest in areas such as dairy, water and food retail.



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