Sovereign wealth and private equity forge strong links

"The sovereign wealth funds of the Arabian Gulf are now a crucial source of capital and liquidity, as much of the rest of the world copes with slower economic growth," said Swati Taneja, director of the second Private Equity Forum organised by IIR Middle East, that takes place at Al Murooj Rotana Hotel, Dubai, 22-26 June 2008.

"The sovereigns are also taking a longer view than banks and wealth fund partnerships are now one of the major driving forces behind the dramatic growth in Middle East private equity with total money under the management at over $13.3bn."

The total assets of sovereigns are estimated by Private Equity Intelligence (Preqin) at over $3 trillion with Middle East investors the largest regional grouping, accounting for more than 40% of all wealth fund capital. "It is also estimated that as many as 60 private equity managers in the Middle East are currently seeking around $26bn with sovereign wealth funds likely to be a vital source," Taneja added.

Preqin, in a recent report, said 60% of the world's sovereigns are currently investing in private equity and have between $120 and $150bn committed to the sector - equivalent to 10% of the entire global capital of private equity - with huge growth potential.

The sovereigns are also busy buying direct stakes in some of the world's largest private equity organisations. China Investment Corporation recently bought a $3bn stake in Blackstone of the US; Abu Dhabi's Mubadala Development Corporation spent $1.3bn on a stake in the Carlyle Group, also of the US; and the Abu Dhabi Investment Authority has a stake in another US private equity firm, Walden Capital.

"Typically, the debt component of private equity transactions has been provided by large banks," said New York-based Aamir A. Rehman, an expert in global corporate strategy and author of Dubai & Co: Global Strategies for Doing Business in the Gulf States. "Wealth funds providing debt in buyout situations, however, generally do not syndicate the debt. Instead, they hold on to it.

"In today's environment, sovereign wealth funds can insist on a genuine partnership with private equity firms by which they are more than merely providers of debt. At the same time, private equity firms can benefit from sovereigns' increased investment savvy and their ability to help portfolio companies grow."

Some of the most senior and successful venture capital and private equity leaders from around the world and the Arabian Gulf will be gathering in Dubai for the Private Equity Forum to explore how the region can best seize market opportunities both regionally and worldwide. There will also be streamed sessions focusing on opportunity sectors such as clean technology; financial services; IT, media and telecom; energy; healthcare and life sciences; and infrastructure and construction.

Headline sponsor of the forum is Ithmar Capital, currently managing proprietary investments in excess of $500m across the region. Diamond sponsor is M'Sharie LLC, the corporate venture capital arm of Dubai Investments.