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EXCLUSIVE: Gulf Family Offices And European Distressed Assets - An Analysis

Alastair Graham, 22 April 2020

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What are family offices from the Middle East doing in terms of investing in European assets, such as those affected by COVID-19 and the associated government lockdowns on economic activity? This news organisation's data partner, Highworth, delivers the figures.

(Alastair Graham is founder and managing director of Highworth Research, an organisation tracking the behaviour of single family offices. He regularly analyses trends in this space. To find out more about the Highworth database, click on this link here.)

A few days ago the Financial Times published an article about Gulf sovereign wealth funds which are “mobilising to buy assets whose valuations have been hard hit by the coronavirus pandemic  …people close to the funds said they were looking to invest in areas that would bounce back in a global recovery.”

Sadly, distressed assets will no doubt soon be flooding the market looking for rescue investors. Sovereign wealth funds are an obvious port of call for investment bankers seeking buyers for their clients’ assets, or subscribers for rights issues, as well as for asset managers seeking investors for the many distressed assets funds which will doubtless soon be launched.

Sovereign wealth funds – the challenges
The Gulf funds certainly have the money: Abu Dhabi Investment Authority manages $696 billion, the Investment Corporation of Dubai $239 billion, Mubadala Investment Company $232 billion, the Kuwait Investment Authority $534 billion, the Qatar Investment Authority $328 billion, and Saudi Arabia’s Public Investment Fund $320 billion.

Yet there may be problems for bankers and asset managers taking potential deals to the sovereign wealth funds. The oil price is at a 20-year low as coronavirus depresses demand, and Gulf countries may need to draw on their SWFs to support their domestic economies. Secondly, sovereign wealth funds have high visibility and there is strong competition for their attention. The queues at the doors of ADIA, the PIF, the QIA, Mubadala and others will be long.

Sovereign family offices - much less well known
Much less is known about another type of sovereign wealth fund, much smaller than their institutional big brothers but with assets still measured in the billions. They are unlikely to have a queue at their door because many bankers and asset managers don’t know where the door is. 

These are the sovereign family offices, or the family offices and family investment companies belonging to members of Gulf royal families. Their fortunes may have been triggered by access to inherited sovereign wealth and subsequently increased during the oil boom periods of the seventies and eighties when landholding values accelerated rapidly and fortunes were made from burgeoning local economies. All the royal families of the Gulf countries without exception have senior members with actively investing family offices.

Sovereign family offices – foreign assets do have appeal
True, the traditional approach of many such sovereign family offices is to invest in national rather than foreign assets. But there are exceptions. Also true, the assets under management of many of them are in the range $1 billion to $3 billion, far less than the likes of Mubadala or the QIA. But they are actually quite numerous, not just one or two per country. And some of them, being owned by senior members of the ruling family, will have a degree of influence over their national sovereign wealth funds. Furthermore, the queue at their door may be manageable.

Single family offices database opens the door
So who are these sovereign family offices which invest internationally and what are their favoured asset classes? The Single Family Offices Database from Highworth and its partner WealthBriefing is an online resource which provides detailed profiles of over 900 single family offices globally, including a number of sovereign family offices in Gulf countries. Here are examples from the Database: 

Action Group, Kuwait, is the family office of HH Sheikh Mubarak A M Al-Sabah, a member of the Kuwait ruling family. Among its investments Action Group owns a chain of 14 budget and mid-scale hotels in the Gulf and Australia, and is a regional partner with IWG, formerly Regus Group, in running serviced offices in the Gulf. Might some bargains become available if Action Group wishes to expand in Europe? 

Last week IWG disclosed that they were looking to sell and leaseback more than 10 of their UK office buildings, while Travelodge said that they are hiring investment bank Moelis to advise on restructuring.

Premier Group, Bahrain, represents the private investment interests of King Hamad bin-Isa Al-Khalifa and members of his family. The group owns 5-star hotels in Park Lane, London, as well as being an investor in international private equity funds. With luxury hotel groups shut down globally, even the big chains are likely to be looking for investors with the patient capital to invest beyond the current crisis.

Miras Investment & Project, Oman, is a family office associated with members of the Al Busaidi family which is closely related to the ruling family of Oman. The family office is one of the largest in the Gulf. Among its favoured investment segments are top-quartile private equity funds, including those investing in distressed assets.

Al Mirqab Capital is one of several sovereign family offices in Qatar, which is controlled by H E Sheikh Hamad bin Jassem Al Thani, a great nephew of the first Emir of Qatar. Al Mirqab invests both in international financial services institutions, including a 6.1 per cent stake in Deutsche Bank in the 2008 financial crisis, as well investing in luxury hotels. 

Mayhoola for Investments, a further Qatari family office belonging to HH Sheikha Moza Al-Missned, second wife of the former Emir of Qatar, invests in high-end luxury fashion brands, currently unable to sell their products due to the retail shut-down. Sheikha Moza was initially reported by some media to be the purchaser of London’s Ritz Hotel last month, the sale of which involved some Barclay family dissension, but this was denied: there are other more likely candidates among Qatari sovereign family offices.

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