While the markets have been distracted by the noise surrounding Brexit, one particular investment management firm remains steadfast in its commitment to Islamic opportunities in developed markets. Falconvest, a new venture from a quartet of some of the industry’s most experienced bankers, will focus on Middle Eastern wealth seeking investment opportunities in the UK and US markets, and recently launched services in alternative investments, including structuring private equity and real estate deals in a Shariah compliant manner. DANIAL IDRAKI brings you the story.
Falconvest was founded by four individuals who had been instrumental in developing the UK’s Gatehouse Bank, as well as working with an illustrious list of industry names including Bahrain-based Arcapita Bank. This year, those four former Gatehouse executives: Christopher Combs (former executive vice-president and the head of product development and distribution), Henry Thompson (former CEO), Arthur Rogers (former executive vice-president and general counsel) and David Swan (former executive vice-president and the head of real estate investment) decided to strike out on their own, to leverage the knowledge, expertise and networks that they have accumulated over the years.
“Having been with a number of firms over the years and looking at what investors were demanding and where the market was going, we took the view that the best way forward was to be a pure plain investment manager that is small and nimble with a low cost base, and that focuses purely on investments and delivering returns for investors,” Combs told IFN.
What gives Falconvest’s services a unique value proposition is a focus on low-risk, high-yield investments both in the real estate and private equity markets across the UK, Europe and the US. Despite the sharp drop in energy prices and the overall slowdown in the Middle East, demand from investors in the region is expected to be solid, with a number of deals already in the pipeline.
According to Thompson, although there are several players offering US and European private equity deals to Middle Eastern investors, few if any are doing this on a Shariah compliant basis. “The feedback that we get from clients is that there is appetite for Shariah compliant private equity in these markets. We certainly understand the space well, and the objective would be to focus on the kinds of deals where we can add value,” he confirmed. On the investments that the firm will make in the private equity sector, Falconvest will be looking at companies that are fundamentally Shariah compliant, such as branded consumers, energy and infrastructure, with the objective of being able to cater to both Islamic and conventional investor categories.
Aside from private equity, both Combs and Thompson noted that the firm will also pursue Shariah compliant real estate investments in asset classes that they are familiar with, such as senior living and retail parks. The real estate sector is a crowded and competitive arena, acknowledged Combs who believes that the firm’s unique proposition is their long experience in the market and excellent client contacts. “The key difference to note is that our overarching theme is to be responsive to the desires of our clients. For example, if a client wants to buy a property in the City of London with financial tenants, we can advise them on that. However in our experience, there are also many clients who prefer Shariah compliant investments,” Combs explained.
Falconvest will be looking primarily at equity investments in the range of 10-50 million, either in the pound sterling, the euro or the US dollar. “However, because of our networks and contacts, we are actively engaged with clients who are looking for properties that would be larger than that amount. In a bespoke situation, we can go outside of our sweet spot,” Combs added.
The firm, however, is not about to take undue risks when it comes to matters such as leverage or underwriting unrealistic return expectations. “The fundamental point is to find the right risk and reward balance, which is crucial. Also, if you move up the risk and reward spectrum, the objective is to create deals that are well structured and well underwritten, that seek to preserve capital and in many cases create an attractive yield. By creating an investment which is more value-added for the client, you aren’t just buying a building, but rather putting together a portfolio of assets or creating a joint venture with [a] well-respected partner. In some cases, you may in fact be taking some initial but limited construction risks, which will then translate into higher yields for the investment horizon, with [a] decent ROI,” Thompson explained.
With their first transaction expected to close by the end of summer, we can hope for great things for a firm that might be new, but has a very distinguished pedigree.