Page 78 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

62 PART I Background and Context

T ABLE 2.4

Specialist Government Investment Vehicles Exhibit both Public and
Private Attributes

Public-Sector Attributes Private-Sector Attributes
Government ownership Scale akin to private firms
Alignment with overall Pursuit of focused investment strategy
economic strategy Often take strategic stakes in portfolio companies
Linkage with institutional Often use leverage and complex financing
framework for wealth
Active management by internal teams
allocation
Competitors and comparables are generally
private firms

generalist SWFs, the category is growing fast and includes some of
the region’s most dynamic investors. In fact, many of the high-profile
acquisitions made by Gulf investors in recent years (including, for
example, stakes in Ferrari and Barney’s) have been made by these
institutions.
Specialist GIVs are, in many ways, hybrid institutions. These
vehicles exhibit attributes of both public-sector investors and private
investment institutions and are thus largely a cross between the SWFs
we have just discussed and the region’s private investor base. Table 2.4
outlines key elements of GIVs’ operating model that reflect a blend of
public and private attributes.

Public Ownership

Specialist GIVs may operate much like private investment firms, but
they are ultimately funded by GCC governments. The creation of
such GIVs, from the perspective of governments managing large
portfolios of wealth, serves both strategic and organizational pur-
poses. Strategically, it has become increasingly important for Gulf
governments to diversify their investments beyond the conservative
asset classes favored by SWFs. Like other giant institutional investors
worldwide (for example, university endowments and public pension
funds), Gulf governments have become increasingly inclined to allo-
cate some wealth to alternative investments. These include asset
classes like real estate, private equity, and buyouts—asset classes that
have inherently higher risks but also promise higher absolute returns.