Dubai's Shuaa seeks to double assets to $10bn in next five years

Exclusive: The investment banking and asset management company is looking at several investment deals as well as opportunities to monetise assets, chief executive says

Shuaa Capital plans to launch at least two more investment funds this year. Photo Shuaa Capital

Shuaa Capital, an investment banking and asset management company, aims to double its assets under management to $10 billion in the next five years and is evaluating several investment deals across the broader GCC, its chief executive has said.

The company is looking at potential investment opportunities, particularly in Saudi Arabia and the UAE, the Arab world’s two largest economies, including deals in the real estate and hospitality sectors, Fawad Khan told The National in an interview.

The Dubai listed-investment manager is also looking at divestment options, including public listings, as well as partial exits through strategic investors, for its portfolio companies as it continues to evolve and reshape its asset base.

“We have a target when we look at our assets under management (AUMs) of building them back in the next five years to about 10 billion,” Mr Khan said.

“Significant growth” will come from the company’s assets managed under its umbrella of Incorporated Cell Company (ICC) fund structure, he said.

“We launched that towards the end of 2020 and 2021 and that's already a $350 million AUM business from zero … that can easily be a $1 billion-plus AUM within the next 12 to 24 months and even higher.”

Shuaa, which has gone through a business transformation over the past few years, at its height managed more than $13 billion in AUMs. It is now focused not only on growing the asset base but also on the “quality of AUMs”, Mr Khan said.

“We actually probably generate the same amount of management fee income on the $5 billion AUMs portfolio that we did when we had $13 billion in AUMs,” Mr Khan said.

“What I mean by quality of AUMs is two things: first is the fee income that we make as a percentage of AUMs and the second is the stickiness [longevity] of AUMs.

“Today, about $2 billion, almost half of our AUMs are in permanent capital vehicles or quasi-permanent, and that's an important distinction because that allows me to plan for longevity in terms of our management fee income, so it creates that stable base.”

In terms of potential investments, Shuaa is looking at target companies with “real assets” including asset-backed real estate transactions, and deals in shipping, industrial and hospitality sectors.

“We believe that these are also quite cyclical, and because they're asset-heavy, they're typically debt-heavy as well … and that's where the opportunity lies,” he said.

Shuaa generally shies away from social infrastructure deals in education and health care sectors, however, it may selectively look at opportunities if they become available.

“I think where we've succeeded in the past ... it has been the real assets. The pipeline is quite busy because we're looking at things from a financing perspective, from a private equity perspective, we're looking at things from co-investors' perspective and we're looking at things to lead on as investors as well,” Mr Khan said.

Shuaa is targeting companies that have strong operating businesses and that may just have the wrong capital structure or may need to refinance debt.

“We're looking at a situation right now, for example, where we're saying let's do a combination of debt and preferred equity,” he said of a potential investment deal.

The company is looking at “two or three” deals in the real estate sector alone and “I'm really hoping we announce something in the next few weeks”, he said.

Shuaa is also looking at opportunities to monetise four to five of its portfolio companies including Stanford Marine Group.

In 2021, Shuaa took full control of the offshore marine services company which builds vessels for the oil and gas industry, when it bought Dh1.13 billion worth of its debt.

Shuaa also acquired Allianz Marine and Logistics Services Holding, Abu Dhabi’s offshore support vessel provider, in a leveraged buyout deal in 2022, and merged it with Stanford Marine to create a larger entity.

“It's a good time for the industry right now as oil prices have recovered. The region is spending heavily in capex so the financial performance of this business is better than last year, which was better than the year before,” Mr Khan said.

“Of course, the next question people are approaching us with is why don't you IPO? Why don't you sell?”

Mr Khan said Shuaa is “looking at all options on the table” while it remains focused on increasing the company’s profitability as high as it can get.

“But at the same time, we don't want to make the mistake of getting wedded to investments … sometimes they [the companies] have a better life in the public domain and sometimes they have a better life being part of a larger industrial business,” he added.

In July, Shuaa sold a plot of land in Business Bay to developer Danube Properties for Dh190 million, when it arranged the sale on behalf of its subsidiaries and other investors.

The transaction was in line with Shuaa's continuing strategy to consolidate its asset portfolio, it said at the time.

Shuaa, which swung to first-half profit on Thursday on a revenue boost from its asset management and investment banking businesses – has made efforts in recent quarters to diversify its product portfolio and increase its fee-income business.

In February, it announced the launch of two Sharia-compliant funds – a Saudi Arabia-focused investment vehicle and a dedicated money market fund that would take Shuaa's assets managed by its product platform to more than $400 million.

Currently, Shuaa is in the process of launching the money market fund, Mr Khan said.

“Depending on one of the other transactions we're looking at, we would probably look to put another real estate or a special situations fund, or maybe both, by the end of the year,” he added.

In December, Shuaa also set up three Sharia-compliant funds within the Abu Dhabi Global Market, bringing AUMs on the company's Sharia-compliant platform to more than $200 million.