Adcom Systems in bid to shoot down rivals


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An Abu-Dhabi company based in Musaffah plans to take on the world's largest defence manufacturers with a high-altitude unmanned aerial vehicle (UAV) capable of flying above commercial airliner traffic for several days at a time. Adcom Systems, which has been producing unmanned target-training drones since the 1990s, is preparing to unveil its latest design for a seven-tonne surveillance UAV at the next Idex defence exhibition in Abu Dhabi in February.

"It will be very sophisticated when it is introduced," said Ali al Dhaheri, the general designer and chief executive of Adcom. "We hope to be able to show it at Idex, and will begin [flight] testing after that." The aircraft could become commercially available as early as the end of next year and would be categorised as a high-altitude, long-endurance UAV, or HALE. Although a final name has not been designated, it is provisionally called "Smart Eye 2". The original Smart Eye is a smaller UAV that is expected to undergo flight tests this year.

Marko Lukovic, the principal aerospace and defence consultant for Frost and Sullivan, said the only HALE category aircraft currently in production was by the Northrop Grumman Global Hawk, a 10-tonne UAV that has been ordered by the US, Germany and NATO. It can fly for 36 hours at an altitude of 20,000 metres and a distance of more than 25,000km. It carries sophisticated surveillance equipment and sells for between US$30 million (Dh110.1m) and $50m each, with costs easily doubling when long-term support contracts are bundled in.

"These are fairly complex systems and due to the size and money involved, you can't afford to lose. It all has to really work well from the word go," Mr Lukovic said. Adcom is one of a number of local companies to cater for the UAE Armed Forces. It has also produced many different kinds of ammunition including 9mm and 50mm calibre bullets and found success with its Yabhon series of target drones in the early 2000s, which are used by military personnel to test the country's missile and fighter jet defence systems.

The target drones are fitted with jet engines and can fly at up to 900kph, are made of lightweight composite materials and cost up to €250,000 (Dh1.12m) each. They replicate incoming missiles and are shot down by fighters or defensive missiles such as the Patriot system. Adcom's move into UAVs will see it develop products for what is expected to become the fastest-growing segment of the defence industry this year, according to a forecast from the UK-based consultancy Frost and Sullivan.

Mr Lukovic said Adcom was a growing company with high ambitions. "They have been talking about their programmes for a couple of years now but there hasn't been much development," he said. "So I am really interested in seeing their UAV and think it would be an important breakthrough in the HALE market, especially if a Middle Eastern company produces it." He said such UAVs could be in high demand in the GCC for border surveillance, anti-piracy operations and could be integrated into Gulf states' armed forces. The planned size of the Smart Eye 2 reflected Adcom's ambitions, Mr al Dhaheri said. "We are recognised now and are a big developer but we want to become one of the biggest players in the world."

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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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Ahmad El Sayed is Senior Associate at Charles Russell Speechlys, a law firm headquartered in London with offices in the UK, Europe, the Middle East and Hong Kong.

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