Unemployed bankers head to Dubai

Recycling the $400bn annual surplus from the Opec countries back into the global financial system could prove easier from the vantage point of Dubai, and living the good life is certainly still cheaper than in London or New York.

But investment bankers heading for the Gulf are not going to find the streets paved with gold. For a start, the local banking community is already very active, and the number of premium clients is rather small.

Indeed, there are probably about 20 top institutions that any serious investment banker or hedge fund manager would like to know, and around 50 major clients in total. After that you are competing for a lot of high net worth individuals who are also used to being pursued by endless friendly new financial advisers.

Closed shop

If it looks like a bit of a closed shop that is because it is. However, there will always be an ear for a decent investment proposal, although it can take time to reach the level of the decision makers.

Gulf investors are also considerably brighter and better advised than many newcomers assume. It is not unusual in major families for group management to be entirely separated from investment activities and for the senior members to spend almost their whole time on new investment opportunities.

New investment bankers need to do their homework well and establish exactly what is likely to interest a potential customer. What is their current portfolio? What have they been buying or researching? Who is the real decision maker?

Approaching sovereign wealth funds with direct investment opportunities has become more common since Citi successfully approached the Abu Dhabi Investment Authority last autumn. And the SWFs will consider investments of as little as $50m, usually with the aim of buying more if all goes well.

M&A activity

Another avenue worth pursuing is regional merger and acquisition strategies. The Gulf States are still fractured into national markets and multinational companies are rare, which is strange because the same considerations of economic scale and product marketing apply here as in the industrialised countries.

IPO mandates may also soon be thick on the ground. There is a huge pipeline of regional IPO candidates but local stock markets are still in a fragile state after the crashes of 2006 and apt to follow global trends.

More reliable might be the corporate sukuks â€" or Islamic corporate bonds â€" but these issues fell by half in the first quarter compared with a year ago, due mainly to the global credit squeeze affecting all bonds, Islamic as well as conventional.

So new expatriate bankers will have to work hard for their commissions in Dubai and provide genuine innovation to win business. But the region is likely to be a richer place for their coming, if only because they tend to spend so much.