A quick presentation on the pitfalls and problems of raising investment fund capital in the Middle East, as well as the pros & cons of the various strategies used when attempting to penetrate this historically difficult - yet highly lucrative - market.

1. Forewarned Is Forearmed
Understanding The Obstacles To Raising Capital In The Middle East
Friso Buker MBA MSc

2. The Good News

3. Proportion of UHNW Households (per 100,000) ¹
UAE 5
¹ UHNW households: more than US $100
Singapore 5 million in AuM
Denmark 5
Qatar 6
Norway 7
Austria 8
Kuwait 8
Hong Kong 9
Switzerland 10
Saudi Arabia 18

4. Proportion of Millionaire Households (%)
Belgium 3.1%
Israel 3.4%
Taiwan 3.5%
United States 4.5%
UAE 5.0%
Kuwait 8.5%
Hong Kong 8.7%
Qatar 8.9%
Switzerland 9.9%
Singapore 15.5%

5. And That’s Not All........
Wealth as AuM
Over US $500 billion
2009 – 10: US $4.5 trillion (+8.6%)
currently controlled by
2010 – 15: US $6.7 trillion (+49%) women
66% of Offshore Funds Private Wealth (GDP %)
in Dubai
Saudi Arabia 81% Kuwait 68%
Saudi Arabia + Turkey + Iran +
Kuwait + Russia Qatar 65% UAE 63%

6. The “Not So
Good” News

7. Current GCC Household Investment Trends
Bonds • Very few managed
13% funds in household
portfolios
Cash and • Increased emphasis on
Regional Short Term wealth preservation
or Local Deposits rather than wealth
Equity creation → more real
Markets 56% estate, low yield
31% sovereign and
corporate bonds

8. CONCLUSION
Financial crisis
Increased risk aversion
Extremely difficult to raise investment
capital in the MENA region

9. That’s Not The
Whole Story...

10.  Global financial circumstances are only partly to blame
 Raising capital in the Middle East has always been difficult
 Lack of cultural awareness → ineffective capital raising strategies have
barely changed
 Failure to adapt to - or even understand - regional business customs &
practices continues to be a major obstacle

11. “It’s The Culture, Stupid”
Culture is more often a source of
conflict than of synergy. Cultural
differences are a nuisance at best
and often a disaster.
Prof. Geert Hofstede, Emeritus
Professor, Maastricht
University, Netherlands

12. Qataris unmoved by
wealth managers
Many fund managers are coming to the realization
that tapping into surging wealth in Qatar and the
rest of the Gulf region would not happen
overnight, and could require investment in
offices, branding and marketing for years or
even decades

13. No honey, no money: Wealth
managers learn the regional
ropes
Investment managers must go beyond facts and
learn to woo potential clients in the region
through good reputation and genuine
human connection

14. The Nature of
Doing Business
in the Middle
East

15. “Know Your Customer”
High Collectivist
High Power High
Distance Context
“Polychronic”

16. General Cultural Determinants
 High Collectivist
• Strong emphasis on family, tribe and country
• Critical values include honour, face, trust and hospitality
 High Power Distance
• Extremely bureaucratic
• Numerous power brokers and decision-making layers
 High Context
• Collectivism, status and the need to save face is paramount
• Aided by complex communication “system” that are more implicit than explicit
 “Polychronic”
• Complex management of time that is largely relationship-driven
• Timing and diplomacy supersedes the need for urgency

17. Middle Eastern
Business Success
Factors

18. Business Success Factors
 “Business is personal”
• Long distance relationships rarely work
• Building personal relationships with investor(s) is key
• Cold calls do not work; referrals or references are a must
• Building a beneficial relationship: 8 – 48 months
• The Spoken Word
• Contact with potential client → excessive amount of pleasantries and small talk
• Middle Eastern cultures place a premium on trustworthiness and “getting to
know you”
• Contracts are more like codified MoUs that underpin a trusting relationship.
Focus on the relationship rather than just the contract!!

19. Business Success Factors
 The Decision-Makers
• Most of the power to make decisions lies in the hands of a very select group of
individuals
• Delegation of power is based more on loyalty than efficiency or competence
• The number of decision-makers will almost certainly hamper the negotiation
process
• Build relationships with everyone to varying degrees; from “pencil pushers” to
the top
• Do you really know who is making the final decision?

20. Market Entry
Strategies

21. The “Permanent Presence” Strategy
Funds (ring fenced) $2 million +
Salaries + allowances $80K+ pm
Office rent $10K+ pm
Legal fees $10K+
Duration 8 months
Total $2.4 million +
 Licensed, regulated presence  Time, effort and money
 Regulatory / licensing hurdles
 Still no network of investors

22. The “Placement Agent” Strategy
Retainer Negotiable
% of underlying fees Negotiable
Office rent None
Legal fees None
Duration Variable
Total Dependent
on success
 Low cost, local representation  Historically ineffective
 No indication if demand exists
 Chances for misrepresentation

23. The “Trusted Representative” Strategy
Yearly travel costs $4,000
Hotel costs $8,000
Entertainment $10,000
Transportation $2,000
Duration “on-site” 20 days
Total $24,000
 Active representation  Historically ineffective
 Limited networking chances
 Small number of funds
 Poor investor perception
 Not local

24. The “Investor Guide” Strategy
Fees per quarter $10K +
Yearly travel costs $4,000
Hotel costs $8,000
Entertainment $10,000
Transportation $2,000
Duration “on-site” 20 days
Total $64,000 +
 Relatively effective  Are the meetings worthwhile?
 Relatively good cost / benefit  Guides not licensed
 Local  No definable track record
 Limited or no “follow up”
 High average daily cost

25. When You Get It
Right...

26. You Get The Meeting !!
How long will this take?
Decision
Third level meeting
3 – 6 months
Second level meeting(s)
1 – 3 months
First level meeting(s)
1 – 4 weeks

27. The Ideal
Strategy

28. Conclusion: The Ideal Strategy
 Middle Eastern culture – even in business – is significantly different to
Western business culture, so adapt to it
 Establish a permanent presence in your market and use it to build
relationships
 Accept that it will take time and effort to make decent progress
 Adapt to Arab cultural norms
 Understand your client
 One success may quickly lead to others once financial and personal
trustworthiness has been established

29. Thank You For
Your Attention
ae.linkedin.com/in/frisobuker/