Arif Naqvi, the founder and ex-chief executive officer of Abraaj group.
Arif Naqvi, the founder and ex-chief executive officer of Abraaj group. Image Credit: Supplied

Dubai: Actis, the private equity firm based in the UK with $12 billion of assets under management, said it has assumed the management rights of two funds of Abraaj with size of more than $1 billion, bolstering the footprint in the growth markets.

The PE firm said it has bought Abraaj Private Equity Fund IV and Abraaj Africa Fund III, a global buyout fund and a fund for investment in sub-Saharan Africa respectively for an undisclosed sum. The size of Abraaj Africa Fund III was approximately $1 billion, while the size of Abraaj Private equity fund IV was not known.

Abraaj had been the largest leveraged buyout firm in Dubai, but later run into rough weather and eventual closure after Bill and Melinda Gates Foundation accused the firm of conmingling of its $1 billion healthcare fund.

Top Abraaj executives are out on bail but are facing trial in the UK and the United States.

Former Abraaj Managing Partner Mustafa Abdul Wadood has agreed to cooperate with US prosecutors in the case and has also accepted that he decieved investors at the direction of the founder Arif Naqvi. The embattled private equity firm Abraaj have been attempting to sell its funds since the beginning of the year, and the said transaction has been the first success.

The transaction includes investments in 14 portfolio companies across the two funds, a move that would further strengthens Actis’ existing market position and team in Africa and the Middle East.

“When a number of investors asked us to step in to be part of a solution in mid-2018, we sought to respond constructively. A dedicated team from the Actis platform put forward a comprehensive and flexible proposal,” Andrew Newington, Actis’ Chief Investment Officer, who led the process, said in a statement.

Actis employs over 250 people across 16 offices.

Analysts cited cautious tone for the private equity industry in the Middle East, which has been facing funding pressure due to crisis of confidence after the Abraaj episode.

“Selling the assets would help investors to give their money back. The reputation was badly damaged because of the Abraaj story. Overcoming the Abraaj debacle would take many many more years to come,” Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital told Gulf News.

According to a recent survey by Emerging Markets Private Equity Association (EMPEA), following the collapse of Abraaj, many investors have increased their risk assessment of investment in the emerging markets private equity funds.

“The fallout has prompted many limited partners (LPs) to expand the scope of their due diligence processes to include a closer look at the internal operations and governance arrangements of fund managers,” EMPEA said.

“I think it [the acquisition of management rights] impacts the private equity industry positively. Finding buyers in a desperate situation can demonstrate industry’s ability to source solution. It can bring back needed confidence to a battered industry,

M R Raghu, Head of Research at Kuwait Financial Center (Markaz)