The biggest collapse in private-equity history will have a lasting impact
IN SEPTEMBER 2017 executives at Hamilton Lane, an asset manager, received an email. Entitled “Abraaj Fund VI warning”, it accused the Abraaj Group, a buy-out firm based in Dubai, of inflating the value of its investments to lure capital into its latest fund. The email was anonymous and littered with typos and grammatical errors, but its tone was sinister. “The governance is not what it appears but employees are afraid to speak,” it said. Hamilton Lane forwarded it to Abraaj, requesting documents disproving the claims. The evidence provided allayed its concerns, and the firm backed Fund VI with over $100m.
Similar emails went to other Abraaj clients. They had little effect: weeks later Fund VI had already attracted $3bn, half its $6bn target. But the firm’s problems were real. Its collapse last year consumed millions of dollars of investors’ money, the reputation of Dubai’s financial regulator and Abraaj itself. Even as rivals divide up the firm’s former empire, it threatens to cause yet more damage.
It had taken 16 years for Abraaj to become the best-known emerging-markets buy-out firm. With over 30 funds spanning Africa, Asia, Latin America and Turkey, it managed $14bn in assets. Its Pakistani boss, Arif Naqvi, was a Davos regular and arts patron. He presented a kinder, gentler face of private equity: Abraaj’s $1bn...