Investcorp, which counts Mubadala Investment Company as its biggest shareholder, could increase its assets under management to about $75 billion over the next five to seven years with Asia accounting up to 20 per cent of its total portfolio, according to its co-chief executive.
Private markets and alternative assets are currently experiencing a compounded annual growth in the “low-teens”, which means the Bahrain-based asset manager could more than double its current $35.4bn of assets under management to hit the $75bn mark, Rishi Kapoor told The National in an interview on Wednesday.
“It’s not a question of by when, it’s about what is the appropriate ambition for Investcorp to have in the medium-term,” Mr Kapoor said. “We should certainly be at par with, or hopefully ahead of that pace, given our history, pedigree and performance track record.”
Established more than four decades ago, Investcorp has grown to become one of the leading alternative asset management companies in the region, investing across assets classes and geographies. The company has been on an acquisition spree during the pandemic to capitalise on lower asset valuations and is bullish on the prospects of growth for its portfolio, particularly its investments in Asia.
Mr Kapoor expects Investcorp’s US portfolio to account for about 45 to 50 per cent of its AUMs over the five-to-seven year time horizon, Europe to make up about 35 to 40 per cent and Asia’s aggregate to reach at least 15 per cent, or as much as 20 per cent.
If the company is to achieve a doubling of assets over the medium term, about $15bn or more should be contributed by its broader Asian investments, which also includes the company’s portfolio in the Gulf, he said.
“That’s our aspiration, that’s our ambition and that’s the capacity of the market in terms of absorption,” he added.
Investcorp expects China, the world’s second largest economy, and India to lead AUM growth in Asia, with contributions from some Asean states.
“We have to recognise that Investcorp has been a permanent fixture of US, European and Gulf markets for 40 years [but] in Asia, relatively speaking, we are still in our infancy,” he said. “We learned how to walk a year ago and now we are beginning to jog a little and we will breakout into a run hopefully soon.”
Alternative asset managers invest in asset classes outside public markets, such as private equity, private credit, venture capital, hedge funds, commodities, real estate and infrastructure.
Investcorp's investment activity of $1.4bn during the first half of its financial year to the end of December 2020 was driven by two new private equity investments in the US and Europe and two add-on acquisitions. It also made eight investments in businesses across Asia.
Investcorp has already invested $500 million in India and a similar amount in China and South-East Asian markets. It launched a platform dedicated to investing in Chinese healthcare companies last year and in June the asset manager said it is investing in Linkedcare, a Chinese software and supply chain management services start-up.
A fund run by Investcorp recently bought a stake in Heritage Foods, a Hong Kong-based maker of condiments and sauces as part of its Asian expansion. Over the next three months, Investcorp plans to exit four Chinese companies in the healthcare and technology sectors through initial public offerings, Hazem Ben-Gacem, co-chief executive of Investcorp told The National last month.
The company, which reported a 33 per cent jump in first-half net profit to $63m on a more than three-fold rise on asset-based income, is also looking to launch a Saudi Arabia private equity pre-IPO fund, which will focus on investing in privately-owned local businesses and preparing them for a listing on the kingdom's Tadawul exchange.
“That [vehicle] is really the natural extension of key fact [that] over the last decade … we have undoubtedly been the most prolific financial sponsor in terms of taking companies public successfully,” Mr Kapoor said. “This puts us in pole position for that Saudi-pre-IPO [investment] vehicle.”
The company has also launched Aberdeen Standard Investcorp Infrastructure Partners fund, a joint venture investment vehicle anchored by Saudi Arabia’s Public Investment Fund and it is looking to continue investing into the region’s real estate assets, he said.
“The pride of place we occupy in the GCC … I think is second to none,” Mr Kapoor said.
The company’s investment themes are aligned with global institutional investors and private family offices who in Investcorp’s annual investment trends report identified automation, AI, an ageing population and the climate change among top-10 investment trends that will shape the global economy.
“Our own design of offering, funds and products capture these trends and bring benefits of economic rewards,” Mr Kapoor said. “The [investment themes] are very aligned.”
The biggest trend in the next three to seven years that investors have identified is the need to build digital infrastructure in automation. Investcorp is one of the primary investors in digitalisation and e-commerce infrastructure – warehousing, logistics, distribution facilities and tech-enabled enterprises – which are underpinning the rapid growth of the sector, he said.
“We are the primary investor in the US market, which by definition is the largest [e-commerce infrastructure market], but also in Europe,” he said. “Now [we are] also looking to expand into Asia in that space.”
The company also remains bullish on the prospects of industrial and multi-family residential properties in the US and it spent more than $300m on real estate in the US and Europe during the first three months of this year.