Economy

Crisis takes its toll on private equity returns

Posted by Zulfi Hydari on June 28th, 2010 under category Economy

More than half of private equity investors have seen their annual net returns from the asset class fall to 10 per cent or less, as the financial crisis has taken its toll says an article in the Financial Times.

The financial crisis and prevalent economic conditions have hurt the performance of the private equity industry by undermining many of the big buy-outs that depend on large amounts of debt during the credit bubble. The crisis has seen the number of investors, making annual returns of ten percent of less, increase from about a fifth two years ago to just over half this year.

The article further states that two years ago, more than 40 per cent of investors had made more than 16 percent annual returns from private equity. This year only slightly more than 20 per cent of investors were able to make similar returns. Investors sitting on private equity portfolios have only achieved single-digit returns and are starting to question the strategies of their managers.

However, investors still seem to have faith in the asset class. A fifth still plan to raise their private equity allocation with just 13 per cent planning to scale back. Investors are also planning to increase their direct investment activity in the next three years. Such deals are expected to be focused on Asia-Pacific region.

Emerging markets will continue to attract a larger share of investors' wealth. The overhaul to investment strategies will happen in the light of lessons learnt from the downturn. There is light at the end of the tunnel and investors are already catching glimpses of it as the global economy gets back on track.

Source: Financial Times

The decade MENA came to be

Posted by Hasan Zulfiqar on February 24th, 2010 under category Economy

MENA FDI inflows in 2008 multiplied 25 times when compared against the average FDI inflows during the 1990’s says a report by Arabia Monitor on MENA Outlook. It further adds that oil at US$50 per barrel will earn the GCC a cumulative US$4.7 trillion in the next 10 years or 2.5x cumulative earnings of the last 14 years.

The report discusses each of the 16 countries classified as MENA and provides a brief outlook of global GDP; expecting GDP growth of 3.1% during 2010. It also suggests a lower long-term growth rate post financial crisis given structural weaknesses and lower government revenues in mature economies perhaps leading to another cycle of asset value correction.

The report specifically highlights the importance of Emerging Market economies. Emerging markets are expected to outperform Rest of the World on various parameters including GDP growth, imports and exports of goods and services and current account surpluses, says the report.

With its specific focus on MENA, the report suggests oil related industries and associated revenues will form an integral part of any future surplus. Allocating/ investing surplus funds in the right sectors and assets will be critical for the long-term sustainability of the region and emergence of a diverse MENA economy. With huge sovereign wealth backing in the key economies of the region, resources are expected to be deployed to support job creation; domestic economic development priorities and infrastructure spend.

The report is an interesting read for economists and analysts looking for historical data and future projections on various macroeconomic, financial and demographic indicators for each of the 16 countries in the MENA region.

Source: Report by Arabia Monitor – The Decade MENA came to be, MENA Outlook Jan 2010

Pakistan Government to sell stake in 9 companies

Posted by Hasan Zulfiqar on January 10th, 2010 under category Economy

The Privatization Commission (PC) of Pakistan in association with JP Morgan is in discussions with the investors from the Middle East to divest government stakes in the country's largest lender and biggest oil and gas producer reported Mr. Sarmad Khan of The National. The central aim is to reduce the debt burden of the country which currently stands at over US$50 billion.

A series of presentations were made to investment houses including Abu Dhabi Investment Authority (ADIA), Emirates Investment Authority (EIA), Abu Dhabi Investment Corporation (ADIC) and InvestAD. The expected timeline as per the Privatization Minister of Pakistan is first half of 2010 to off load stakes in these assets.

The report also lists the asset for sale as Oil and Gas Development Corporation and Pakistan Petroleum, two oil and gas exploration companies, the energy firms Faisalabad Electricity, Kot Addu Power and Jamshoro Power, Pakistan Post Office and State Life Corporation of Pakistan, the country’s biggest life insurer, are also on offer. The government is also offering its remaining 42 per cent stake in Habib Bank.

One of the highest profile privatizations in recent years in Pakistan was the sale of a 26% stake in Pakistan Telecommunications Company to Etisalat, the country’s largest telecom company. It has now been reported that the PC is planning to sell another 25% stake to help reduce the country’s external debt

Whilst most investors are likely to shun acquisitions in Pakistan at this time, it is worth noting that the last time the country was facing such economic and political uncertainty there were some bold investors from the MENA region who took a contrarian view and acquired assets only to make spectacular returns some years later.

Source: Pakistan offers to sell its stake in nine companies

Your child could live to 150

Posted by Zulfi Hydari on September 21st, 2009 under category Economy

Recent advances in science and medicine make it possible that plenty of children born today may, in fact, live until 120, according to a report in the Times of London. There are even scientists who think the first person to live to 150 is already alive. The social and economic implications are potentially far reaching particularly the growing pressure on resources.

Source: http://www.timesonline.co.uk/tol/comment/leading_article/article6825270.ece