Page 94 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

78 PART I Background and Context

“Prestige” Investments

Of the four categories of Gulf investors identified in our framework,
private institutions are the most inclined toward “prestige” invest-
ments. Because private institutions are typically controlled by a fam-
ily or a small number of individuals, investments can be made based
on noncommercial grounds and personal preferences. The same is not
true for public-sector vehicles (which are accountable to govern-
ments) or for investment houses (which are accountable to their
investors).
Sheikh Mansour bin Zayed Al Nahyan, son of the UAE’s found-
ing ruler, also makes investments in his personal capacity. As a pri-
vate investor, he led a consortium buying the UK soccer team
Manchester City in 2007. 42 The purchase, though it may prove prof-
itable one day, was generally seen as a “trophy asset” that reflected
the preferences and interests of the buyers more than a return-focused
financial investment.
Other types of Gulf investor have also bought their fair share of
prestigious assets. Bahrain-based Investcorp, for example, has owned
Tiffany & Co. and Gucci. Abu Dhabi’s Mubadala today owns 5 per-
cent of Ferrari. In the cases of both of these investors, however, busi-
ness benefits have been procured: Investcorp successfully exited its
luxury investments, 43 and Mubadala has used its influence over
Ferrari to join the Formula 1 circuit in 2009 and to set up the world’s
44
first Ferrari theme park in Abu Dhabi. Private investors, by contrast,
are freer to pursue investments that bring nonfinancial benefits, such
as soccer teams, ranches, and prestigious buildings.

PRIVATE INVESTMENT HOUSES: MARKET-DRIVEN MANAGERS
The final category of Gulf-based institutional investors is private
investment houses—a dynamic and fast-growing category with
increasing importance in the region. The fundamental distinction
between “investment houses” and the private institutions dis-
cussed previously is that investment houses manage wealth on
behalf of third-party investors and clients. Whereas private institu-
tions (as defined in our framework) invest their own proprietary
wealth, investment houses provide services to Gulf clients and
manage funds on behalf of others. This difference creates stark con-
trasts in investment strategies, operating models, and internal
capabilities.