Emirates NBD, the region's largest bank in assets, is in the process of soft launching its new infrastructure fund and integrated SME (Small and Medium Enterprises) fund shortly, according to a top bank executive.
Suresh Kumar, Member of the bank's Board of Directors and CEO of Emirates NBD Capital, told Emirates Business that while the funds would be launched in the near future, the value per fund could not be disclosed.
"It is a little premature at the moment. These are approved ideas that we are fleshing out further. Therefore, I would not wish to share more details until we are ready to launch them," Kumar said.
The two funds come as a response to market trends. In a region with a surfeit of short and medium-term capital, the infrastructure fund's objective is to align with long-term projects and raise money in the long run using such projects' own financing structures.
With the GCC (Gulf Co-operation Council) region expected to see a $500 billion (Dh1.83 trillion) surge in new mega infrastructure projects, the infrastructure fund becomes a necessity, Kumar said. "The fund is about infrastructure monetisation. As the region continues to invest in high-quality infrastructure, it is estimated that in the next five years such investments will reach $500bn. The UAE and Saudi Arabia are expected to account for an estimated $200bn each, with the other GCC countries taking the rest," he said.
"We are making its structure into a fund or portfolio, where we can have strategic, institutional and high-value investors chipping in. After all, this is not a retail initiative – it has both private equity and debt all together to make private capital. Some of it will be growth capital, and some will be monetising an existing capital," Kumar added.
The other instrument – the SME fund – is an effort to group fragmented capacities in similar sectors to create scale and more leverage against foreign competition, especially in the UAE's free market climate. "There are a few problems in the SME market. There is fragmented capacity that requires consolidation. Maybe two to three companies need to get together to create some size and scale," Kumar said.
He felt the SME efforts would be done through a combination of good financial advice, restructuring of balance sheets, and bringing in more capital. "This is what we call capital for acquisition and to create synergies in the businesses. We also need a couple of market-leading companies in each sector to clean the market."
"There have been a few infrastructure funds but nothing in the nature of monetising existing infrastructure. By monetisation I mean that capital is already locked into these projects. The approach I am recommending is to unlock that capital and free it up so that the fiscal position of the country or state or province is improved," said Kumar.
GLOBAL SUKUK FUND TO RAISE UP TO $150m
Emirates NBD's Global Sukuk Fund will raise between $100 million (Dh367m) to $150 million in the first 18 months of the life of the product, according to a statement.
Launched last week, the fund will target high net worth individuals and institutional investors. "We think that the demand for income in a low interest and profit rate world will be increased because of the current economic conditions. Additionally, we expect future financing to be popular in the sukuk market and that this will be done at attractive rates. We therefore see market conditions as conducive to the raising of capital for this type of product at the current time," Deon Vernooy, Head of Emirates NBD Asset Management, said in a statement to Emirates Business.
He said the funds' return would be based predominantly on income.