Tuning Into Tech
A key U.A.E. investor, SHUAA Capital’s Group CEO Jassim Alseddiqi is doubling down on technology as he seeks to build a regional financial powerhouse.
A key U.A.E. investor, SHUAA Capital’s Group CEO Jassim Alseddiqi is doubling down on technology as he seeks to build a regional financial powerhouse.
AAs the future of finance takes shape in the Middle East, a face consistently at the forefront of change is Jassim Alseddiqi, Group CEO of Dubai-based asset management and investment banking firm SHUAA Capital.
Consider one of the most hyped local deals this year: the move to take Abu Dhabi-based streaming platform Anghami public. The nine-year-old company is set to become the first Arab tech player to list on Nasdaq in New York after agreeing to merge with a special purpose acquisition company. Alseddiqi played a key role in setting up the deal, which is expected to close this year and gave Anghami an enterprise value of roughly $220 million.
SHUAA acted as financial advisor for the deal and provided $30 million in funding through private investment in a public equity, or PIPE, deal. That came after SHUAA invested an undisclosed amount into Anghami in December 2020. The entire arrangement, says Alseddiqi, shows what SHUAA brings to the table. “We don’t only buy an investment and flip it,” he explains. “We add value to it, and we maximize the return for shareholders.”
Moves like this have helped Alseddiqi chart an ambitious rise in the U.A.E.’s financial world. Since starting the asset manager Abu Dhabi Financial Group (ADFG) in 2011, he’s built a reputation for introducing new investment concepts, making distressed investments, and orchestrating company turnarounds.
In 2019, Alseddiqi merged ADFG with Dubai investment bank SHUAA to create a new financial services platform that manages around $14 billion in assets. “This is a powerhouse,” says Alseddiqi. Listed in Dubai, the firm posted net profits of $34 million in 2020, a rise of 168%, and paid its first dividend postmerger. SHUAA has delivered promising earnings to start 2021, recording its fourth straight profitable quarter in Q1. Net profits reached $6.8 million, and its asset management business enjoyed record results. That’s after a net loss of $71 million in Q1 of 2020 in the face of the pandemic.
Alseddiqi sees the combined entity having few regional peers offering similar capabilities—although it does look up at a few bigger players, such as Bahrain’s Investcorp, which has roughly $35 billion under management, and Saudi’s NCB Capital with assets under management worth over $50 billion. Still, this new version of SHUAA is just getting started. After finishing the integration process in 2020, Alseddiqi is making a slew of moves as SHUAA looks to the future.
Technology is a big focus. SHUAA started 2021 by announcing that it will pursue more tech investments. Alongside backing Anghami, SHUAA structured and placed a $50 million sukuk this year for U.A.E. agri-tech company Pure Harvest. That marked the first time an early-stage business in the region secured venture debt funding from capital markets, according to SHUAA, and saw investors such as Franklin Templeton come aboard.
Pure Harvest’s business is capital intensive currently, says CEO Sky Kurtz, but securing private equity to fund infrastructure is extremely expensive and time-consuming. The company is also establishing the viability of a new tech-enabled sector in the region, complicating matters. “The financial markets and institutions to support our industry remain nascent,” says Kurtz. But when Pure Harvest turned to SHUAA, it stepped up with an innovative solution.
Alseddiqi is eying more tech investments too. “We’re looking at many, many transactions right now, but as you know, it’s quality over quantity,” he says. Simultaneously, SHUAA is also doubling down on developing digital offerings. In June 2021, it unveiled plans to launch a digital wealth platform intended to serve existing clients and attract the next generation of affluent investors. The platform is meant to elevate the traditional wealth management and advisory experience using technologies such as AI.
The platform is a sign of things to come at SHUAA. Alseddiqi believes the firm’s future growth will come from digitization and acquiring clients digitally. He says ten years from now, there won’t be a SHUAA; instead there will be a technology company that focuses on financial services. “I believe that every company will become a technology company globally,” he says.
To spearhead this drive, SHUAA recently brought in Hadi Raad, a Visa and Google alum, as chief digital officer. It’s a new role for the firm and part of
a hiring spree that includes a new CEO for its sizable real estate business. More hiring is coming too, with Alseddiqi reporting plans to boost headcount by over 30% this year.
The days ahead should be active for players like SHUAA. The pandemic obviously increased pressure on businesses, setting the stage for consolidation and macro adjustments, says Saurabh Verma, a senior director with consultancy Frost & Sullivan. That should afford opportunities for asset managers and investment bankers in the region, with sectors from energy to retail and beyond considering heavy investment to fast-track digital strategies. “These will be interesting and busy times for investment bankers and asset managers,” says Verma.
As COVID-19 recedes, Alseddiqi is bullish on regional prospects. He sees the low-interest rate environment, government spending initiatives, and changing regulations all pushing economies towards expansion across many sectors. Simultaneously, Alseddiqi believes SHUAA is poised for profit growth in 2021.
The firm reports a healthy deal pipeline and new fund launches aimed at improving recurring revenues (one of Alseddiqi’s key short-term goals). More headturning moves like Anghami seem possible too. “The conventional transactions will always be there, but we always like to sprinkle in the new, sexy, exciting, exotic transactions and initiatives,” he says. “This is what really makes us excited about what we do.”
Before becoming a key financier in the U.A.E., Alseddiqi was an engineer. He studied electrical engineering at the University of Wisconsin-Madison and later pursued a master’s in electrical and computer engineering at Cornell. Following that, he joined gas processing firm Gasco in Abu Dhabi as an electrical engineer in 2005. He also served briefly as a lecturer for electrical engineering courses at The Petroleum Institute in Abu Dhabi.
But Alseddiqi soon turned his attention to engineering financial deals. In 2006, he joined the Abu Dhabi Capital Group, a private institutional investment house, serving as a business development and structuring manager. Only two years later, he became the firm’s CEO.
He then started ADFG in 2011 as an asset manager serving an investor base including institutions, high net worth individuals, and family offices. Against the backdrop of economic turmoil unfolding during the Arab Spring, the new firm adopted an opportunistic approach that saw it target value in distressed assets.
From the beginning, Alseddiqi introduced new investment concepts to the region. His firm’s first fund was a secondary private equity fund, which focused on acquiring stakes in distressed private equity funds primarily run by GCC managers. That made it the first of its kind in the Middle East, says Alseddiqi. The $45 million fund invested in more than 10 private equity funds in the coming years and proved to be a success.
ADFG quickly branched out, becoming particularly active in real estate. By 2013, it was targeting prime London real estate and it took a majority stake in luxury residence developer Northacre. Simultaneously, in the U.A.E. it invested in properties such as the Marina 101 tower. By 2013, the firm’s assets under management reached $748 million, up from $97 million the year before.
Alseddiqi continued introducing unique investment concepts too. A prominent example came in 2015 with the launch of the activist Goldilocks fund. An open-ended fund, it invests in GCC-listed equities and undervalued assets, with an eye on turnarounds. The first of its kind locally, it has taken stakes in embattled firms like GFH Financial Group and Dana Gas. Since its inception, it has outperformed regional and global indices, delivering a 92% return.
Still, Alseddiqi doesn’t see his approach as that
innovative. “We look at what’s working best in the U.S. or in Europe, and we copy it with pride,” he says. He points to ADFG’s first fund: it was a carbon copy of secondary private equity funds in the U.S. Meanwhile, Goldilocks mirrors activist funds globally. Alseddiqi freely admits the strategy is “plain vanilla.” Yet, it helped ADFG quickly become a notable player in the U.A.E. financial scene.
A key turnaround engineered by Alseddiqi has proved to be the SHUAA brand. ADFG took a controlling interest in the firm in 2016 after acquiring Dubai Banking Group’s 48.4% stake for an undisclosed amount. SHUAA was already a well-known U.A.E. institution, tracing its roots to 1979, however it had struggled after the global financial crisis.
At the time of the deal, Alseddiqi noted the potential for SHUAA to evolve and become a big name in Middle East financial services. SHUAA offered a broad range of investment banking services, as well as a foothold in Saudi Arabia. Following the deal, SHUAA made progress by expanding in Kuwait and Turkey and by refocusing on investment banking and capital markets. In 2017, SHUAA recorded its best financial results in a decade.
Meanwhile, Alseddiqi also targeted technology opportunities. In 2018, ADFG made a strategic investment into global venture capital firm 500 Startups for an undisclosed amount that netted it a board seat.
By 2019, Alseddiqi saw a compelling opportunity to merge ADFG and SHUAA. The region’s banking industry was experiencing consolidations, and Alseddiqi believed financial services overall could benefit from the same process. The combined firm—eventually rebranded under the SHUAA name— initially managed $12.8 billion and began narrowing its focus to asset management and investment banking while exiting non-core areas. “We want to double down on the activities that we do. We will not expand into other activities,” says Alseddiqi.
Complicating matters, COVID-19 reared up barely six months after the merger. With lockdowns looming, Alseddiqi called an emergency meeting with his team in early March. As a firm exposed to real estate, equities, and financial services, the threat of the pandemic required them to adapt quickly.
To strengthen its balance sheet and liquidity, SHUAA issued a high-yield $150 million bond last year, which helped deleverage its business. It accelerated the disposal of non-core units, shedding over half of those assets over the past 18 months. It also introduced new products intended to build recurring revenues, including launching three Shariah-compliant funds last year.
True to form, SHUAA pulled off a distressed investment in 2020, leading a consortium that bought out $308 million of debt held by offshore services company Stanford Marine Group. “The culture of distressed investing or opportunistic investing is still there with us,” says Alseddiqi. Still, he stresses that SHUAA is also focused on growth stories. That saw him get in touch with Anghami’s CEO Eddy Maroun at the height of the pandemic in June 2020 to discuss a deal.
Looking ahead, Alseddiqi should keep people on their toes. He plans to continue localizing innovative investment products—as he is with SHUAA’s digital wealth platform, which he reports is 90% similar to existing global counterparts.
And while some people may sniff at copycat approaches or think that certain investment concepts won’t work well in the Middle East due to local challenges, Alseddiqi’s track record demonstrates a basic truth: localization works. “It’s a very simple strategy; there’s no rocket science behind it,” he says. “What I can say is we have the ambition to do it. That’s what differentiates us; we take the first step all the time.”