An Ansat GMSU 2 manufactured by Russian Helicopters. Tawazun had signed a letter of intent to buy 100 VRT500 helicopters from a Russian Helicopters subsidiary. Photo: Rostec
An Ansat GMSU 2 manufactured by Russian Helicopters. Tawazun had signed a letter of intent to buy 100 VRT500 helicopters from a Russian Helicopters subsidiary. Photo: Rostec
An Ansat GMSU 2 manufactured by Russian Helicopters. Tawazun had signed a letter of intent to buy 100 VRT500 helicopters from a Russian Helicopters subsidiary. Photo: Rostec
An Ansat GMSU 2 manufactured by Russian Helicopters. Tawazun had signed a letter of intent to buy 100 VRT500 helicopters from a Russian Helicopters subsidiary. Photo: Rostec

Business

Aviation

Abu Dhabi fund exits deal with Russian helicopter maker to ‘comply with sanctions’

Parties had entered a deal several years ago to develop civilian aircraft

Alvin R Cabral
Alvin R Cabral

November 17, 2023

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The Strategic Development Fund, the investment arm of the UAE's Tawazun Economic Council, has reached a deal to exit and unwind its partnership with Russian Helicopters for aircraft development programmes.

The fund said that after "the international crisis in early 2022, SDF paused any further investments in Russia to assure compliance with international sanctions", referring to the ongoing Russia-Ukraine conflict.

"In addition, SDF initiated discussions and negotiations with Russian Helicopters to unwind the partnership, in order to have the option to continue the development programmes independently in the UAE," the SDF said in a statement on Friday.

The fund did not elaborate further.

The SDF and Moscow-based Russian Helicopters entered into a partnership in 2020 through Singapore company Aeroter for programmes related to VRT500 choppers and VRT300 unmanned aerial vehicles, which were being developed by the Russian's subsidiary VR Technologies.

Tawazun acquired a 50 per cent stake in VR Technologies in 2019, in which it pledged to inject $400 million to prop up the company.

The move was seen to speed up the development of the company’s VRT300 and VRT500 models and “give impetus to new developments of advanced helicopter and UAV systems”, Sergey Chemezon, chief executive of Russian Helicopters parent Rostec State Corporation, said at the time.

Tawazun then signed a letter of intent to buy 100 VRT500 helicopters from Aeroter during the 2021 Dubai Airshow for €216.9 million ($248.2 million).

Delivery of the helicopters, which were intended for use by the government, were expected by the end of 2023.

The ongoing Russia-Ukraine conflict, which began in February last year, has resulted in several hefty sanctions against Moscow, with many international brands from several industries leaving the country.

The SDF said Friday's announcement is based on an agreement signed on November 14 between the two parties, "so SDF can continue to develop the programme independently in compliance with international sanctions".

The fund, which was established in 2019, is focused on the financial return and economic impact in the UAE’s strategic sectors through equity investment in local and international partnerships and developmental funding towards the Emirates' private sector.

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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Transmission: 9-speed auto

Fuel consumption: 8.6L/100km

On sale: October to December

Price: From Dh875,000 (estimate)

Updated: November 17, 2023, 4:23 PM
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