Eastern values show promise
While Western financial services world languishes, Pirkko Juntunen notes that firms in the East, such as The BMB Group, appear to be cashing in on opportunities for growth
Good news in the financial services industry is rare these days. However, if you look east, in particular to the Islamic world, the view is not so grim. In fact, as many Western banks are pseudo-nationalised and have been fighting for their survival, there are those who see this as an unprecedented opportunity for Eastern financial services players to capture global positions and grow their assets while prices are reasonable.
One of the companies that is definitely on the acquisition path and is looking to expand is The BMB Group. It was founded by Rayo Withanage, chairman and CEO of the group and its subsidiaries, and Yang Amat Mulia Pengiran Anak ‘Abdul ‘Ali Yil-Kabier, co-chairman and also a member of the royal family of Brunei Darussalam. Within four years of its foundation in 2004, through an on-going series of acquisitions, The BMB Group has grown to become one of the largest private domestic companies in Brunei Darussalam.
It may not be a company that is widely known in the West or in the mainstream asset management industry but in the past few months it has made significant deals. It has also appointed professionals - such as Chris Walker, who became head of institutional sales and marketing, in September, last year - to boost its institutional presence. Middle Eastern veteran, David Gibson-Moore, was also hired at the time as deputy CEO.
BMB's strategy is to buy industry leading investment companies and management. In December last year, it bought Washington DC-based EMP Global, one of the world's largest private equity houses dedicated to emerging markets. The acquisition brought EMP into group as its emerging market direct investment arm. The combined group has assets in excess of $10bn (€7.2bn).
Along with the acquisition, BMB also gained some well-known senior staff from EMP. The EMP partner Moeen Qureshi, former prime minister of Pakistan and chief operating officer of the World Bank, is now vice-chairman of the group. He acts as a senior adviser to BMB's global strategy, and the development of its sovereign wealth focus. Another EMP partner, Don Roth, the former head of Merrill Lynch Europe, and treasurer of the World Bank, is now head of principal investments for the BMB Group.
EMP's US operation continues to be run independently, managing existing private equity funds for corporations and governments. The offshore business of EMP is now BMB Emerging Markets which aims to launch a slate of direct investment funds around the world focused on energy, infrastructure and financial services.
Apart from the EMP acquisition, BMP was also selected earlier this year by the Organisation of Islamic Conference (OIC) to manage the assets of its new charitable body, International Zakat Organisation, (IZO) which is expected to be one of the largest in the Islamic world.
The proposed Global Zakat and Charity Fund will manage charitable funds to address needy causes and aims to raise $750m within the first year, increasing to over $3bn once commitments are met. The investment will not be restricted to Muslim countries, but will be used to support charitable causes around the world.
Many of the 57 members of the OIC have already committed themselves to IZO initiatives. The fund will invest in community development projects with an emphasis on sustainability and it will also co-operate with western governments and institutions.
A new fund management company will be set up to manage the fund and is likely to be based in Kuala Lumpur. Both BMB and IZO will work jointly to raise the money from the member countries of the OIC. BMB's participation in the IZO fund is its first association with an international non-profit organisation.
The BMB Group was also recently appointed by UK-based F&C Investments to advise it on its first Sharia-compliant global equity fund. The fund will be launched by the end of summer 2009. It will seek to tap into the UK market which is estimated to be worth billions pounds, with the potential of expanding into other Western markets. At the end of 2008 there were more than 600 Islamic funds with some $60bn in assets globally.
Walker says that there are more deals in the pipeline and targets are private banks and other institutions. "We are looking for acquisitions in the private banking field and particularly those with exposure to the Middle East and the Islamic world. But we are also looking at a broader field and there are big opportunities in the States. We have several prospects and expect at least one to come through this year."
Looking over a five-year horizon Walker is convinced that BMB will be larger by several multiples, in terms of assets, staff and offices globally. "The aim is to become one of the biggest, if not the biggest alternative asset managers and compete not only in the Islamic world but globally," he says.
BMB does not have any exposure to hedge funds and in the short term is not looking in this direction because of the shortage of firms to invest in. "Also, historically, we have zero leverage because of the Islamic focus," says Walker. "However, there are opportunities within the distressed asset area, so watch this space."
Apart from scouting for acquisition targets and finding institutional investors such as private banks and foundations as co-investors around the world, Walker is also busy adding sales staff, particularly in Asia and the Middle East.
However, the group says it is now seeking compelling global investment opportunities and developing financial models that also enhance societies and economies.