The Dubai Future District Fund has set a $1 billion target for assets under management by the end of 2024, a fourfold increase since its was established in 2021 to invest in technology start-ups.
While a market correction globally is squeezing the tech sector, shrinking valuations and cutting jobs, investment in parts of the Middle East is surging.
Start-ups in the Middle East and North Africa more than doubled the capital raised year-on-year in February, with the vast majority of deals done by regional rather than foreign investors, according to industry platform Wamda.
“We're not here to turn a quick buck,” Sharif El Badawi, chief executive of the Dubai Future District Fund, said.
The target is to process three to five times the returns in up to 15-year cycles, a longer time scale than the average venture capital investment period, and with an emphasis on deep tech.
It aims to put half of its investments into venture capital funds with a local focus and the other half into start-ups directly or through Future District-affiliated programmes.
"Dubai has become an international gateway for ambitious investment opportunities, a hub for future-driven project funding and a global testbed for tomorrow's technology and digital economy applications. The emirate provides the ideal environment for technology ventures to develop the highest standards of agility and transparency and create opportunities for individuals, organisations and societies,” Sheikh Hamdan said in a statement issued by the Dubai Media Office on Wednesday.
The fund is designed to increase founders' access to capital in the region and stimulate the development of technology solutions.
The fund, which is anchored by the Dubai International Financial Centre (DIFC) and the Dubai Future Foundation (DFF), hosted its inaugural annual meeting on Tuesday, where Mr El Bedawi laid out new targets.
The Dubai Future District Fund is aiming to have $1.7 billion in equity value in the portfolio by 2025 and $7 billion under management in the next decade.
The aim is to invest in 180 portfolio companies and 55 venture funds with a portfolio worth $43 billion over the next 10 years.
The Dubai government anticipates this will create 185,000 jobs and $20 billion in gross domestic product contribution.
Since its launch 16 months ago, the fund has deployed $28 million in 16 investments, with Mr El Badawi saying it was a slow start to establish governance and operations.
Investment went into 10 start-ups including HR tech firm FinFlx, metaverse augmented and virtual reality developer Vuz and a concierge health app called Valeo.
In the fund of funds portfolio, regional venture capital funds like Outliers, Byld Ventures, Shorooq Partners, Cotu Ventures, MEVP and Nuwa Capital took investments.
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Profile of Hala Insurance
Date Started: September 2018
Founders: Walid and Karim Dib
Based: Abu Dhabi
Employees: Nine
Amount raised: $1.2 million
Funders: Oman Technology Fund, AB Accelerator, 500 Startups, private backers
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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