Investors interested in locking-in significant returns in the medium- and long-term should not just consider investing in the Middle East and North Africa, but should also adapt strategies pioneered by top local private equity firm, a senior industry executive said at the World Economic Forum in Jordan this week. “The World Economic Forum is taking place at a defining moment during which the leverage-based private equity model is being challenged,” said Ahmed Heikal, chairman and founder of Citadel Capital, the leading private equity firm in the Middle East and North Africa with 19 Opportunity-Specific Funds controlling investments of $8.3 billion in 14 industries. “Achieving returns simply through high leverage is not sustainable - building companies, providing growth financing, including greenfields, is more enduring.” “Citadel Capital is pioneering a private equity model based on being a significant principal investor that co-invests alongside limited partners” said Hisham El-Khazindar, Citadel Capital's managing director and co-founder, who attended the forum, where he helped lead a discussion on ‘”Making Financial Systems More Robust.” He said “a root cause of this crisis is misalignment of interests: Most managers have been mistakenly incentivized to take increasingly greater risks with their investors' and shareholders' money. Significantly more ‘skin in the game' on the part of managers should be required going forward.” El-Khazindar also challenged global moves to increase regulation of private equity investors as “excessive.” “Business needs private equity to help lead investment out of recession,” he said. “In fact, we need it now more than ever. Disproportionate regulatory burdens on financiers of growth companies will not mitigate the risk of future crises. While targeted new rules are needed that directly address the world economy's long-term systemic risks, it is important that the international community avoid broad sweeps that are motivated by short-term political posturing and populist discourse.” Citadel Capital Managing Director Ahmed El Houssieny, who was also in Jordan for the Forum, praised the new role of multilateral finance institutions, including the International Finance Corporation (IFC), in providing finance for new projects. “In these times, it is a strong vote of approval to have won the confidence of an institution such as the IFC, which last month announced it was investing in the $100 million Sphinx Turnaround Fund we're sponsoring, which is investing in distressed industrial and other assets in Egyptian small and medium-sized enterprises. Again last week, it announced an investment in the Citadel Capital Joint-Investment Fund.” The region is full of potential for other investors to tap. “The region is laden with opportunities for investors who know where to find them,” El Houssieny told investors and economic officials. “A slowdown in growth today does nothing to diminish our broader term investment rationale; the challenge is correctly buying into these opportunities. Under the current conditions, we are pursuing an incremental approach that allows us to lock in large, attractive investment opportunities with very little in the way of up-front capital commitments,” he noted. __
