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An Era of Change

Saudi Arabia National Transformation Plan Investcorp’s New Vision of Growth

The Review | May 2016 2

Welcome Looking at deal activity over the past few complete the acquisition of The Wrench months, Investcorp has been very active Group in March. Wrench provides on both the Real Estate and Corporate essential home maintenance and repair Investment fronts. Here in the Gulf, the services to over 140,000 customers across Firm acquired a minority stake in one Atlanta, Dallas, Houston and Phoenix, of Saudi Arabia’s leading supermarket which are four of the fastest growing and hypermarket groups, Bindawood metropolitan areas in the U.S. Holding. Since its inception over 50 Real Estate has also been a highlight for years ago, Bindawood has grown from Investcorp these past few months. Fiscal a small trading to one of the year to date, Investcorp has deployed leading retailers in Saudi Arabia with two $484m million in the asset class. This key brands - Bindawood and Danube. included a residential real estate portfolio like Bindawood are at the core of eight properties in Las Vegas, Denver, of Saudi Arabia’s transition into a more Chicago, Atlanta and Dallas; an office consumer-driven economy and we are and industrial real estate portfolio of actively looking to invest in companies properties in Atlanta, San Francisco across the Kingdom that share its growth and Boston; five residential properties potential. in Florida and Minnesota; and an office nvestcorp has maintained momentum In Europe, we built on our long building in Washington, D.C. in its profitability and fundraising investment track record in I hope you enjoy this edition of The I activities while continuing to bring technology by acquiring SecureLink Review and I look forward to us bringing the very highest quality investment Group, a leading cybersecurity more investment opportunities to you in opportunities from across our three infrastructure and managed services the months ahead. business lines to our clients. provider. We see huge potential in The trust that you - our clients and SecureLink and we are working with Mohammed Al-Shroogi the management team on a number of – continue to place in us is a Co-Chief Executive Officer critical part of Investcorp’s ability to initiatives to expand its geographical generate long-term sustainable value. For footprint, helping it become a leading that, I thank you. Strong relationships pan-European player. sit at the heart of everything Investcorp Looking at the U.S. and on the exits does and should you ever wish to discuss front, we completed the sale of Veritext. something with me, I am always eager to hear from you. In other deal news, we were delighted to

Contents

Guest Feature Real Estate Events and Conferences Page 4-5 Page 8-11 Page 15-17 A Time of Change: Saudi Arabia Summary of Investcorp’s Investcorp Leadership Vision 2030 acquisitions Programme Investcorp’s New Page 18-19 Strategy University of Oxford Page 6-7 New Joiners Page 22 Corporate Investment Page 12-14 Outlook The Wrench Group, SecureLink Page 22-23 and Bindawood by Rebecca Hellerstein

The Review | May 2016 3

Letter from Mohammed Al Ardhi New opportunities

ver the past few months, I travelled around the GCC to O visit as many of Investcorp’s investors personally as possible to talk them through our new growth strategy and to thank them for their continued support and trust. At Investcorp, we pride ourselves on the strong ties we have with our investors and we are keen to maintain and strengthen these relationships so that we can deliver more value for you. For those of you that I have not been able to meet yet, I hope we will have the opportunity to do so in the coming months. From a corporate perspective, the first half of our fiscal year marked another strong performance for Investcorp, particularly when you consider the weakening global economic climate and the volatility we have seen across markets. Against this challenging backdrop, Investcorp grew its net income by 12% to $50.9 million in the six months to 31 December 2015. new Alt funds. Alt Beta provides young business leaders from the GCC This was achieved by continued strong the unusual benefit of being negatively at a leading international business transactional activity and placement correlated with traditional asset school for a week of seminars and momentum and solid asset-based class returns, along with liquidity, workshops on leadership, innovation returns on the Firm’s portfolio of transparency, cost efficiency and and management skills. This year, the co-investments. Much of this can diminished fraud risk. So far, we have Investcorp Leadership Program was be attributed to the highest calibre been very pleased with the returns held at the University of Oxford’s Saïd of investment talent and executional generated. Business School. I attended the program excellence that we have here at alongside this group of incredibly As well as growing organically, Investcorp. talented individuals and I would like to Investcorp bought the Fund of extend a personal thanks to all of those I am particularly excited to see Funds business unit of SSARIS Advisors, that attended and made the trip such a Investcorp successfully launch a which expanded our product lines as rewarding and engaging experience. number of initiatives for our clients, well as grew the Firm’s assets under all of which are a key part of the new management. We are continuing to strategic direction for Investcorp that explore a number of other acquisitive was unveiled last year. On the Real growth opportunities in order to Estate front, we have brought on board bring more high-quality investment Neil Hasson to lead our investment team opportunities to our clients. Mohammed Al Ardhi looking at opportunities in Europe. We Executive Chairman already have a long and successful track Over the last six months, Investcorp record of investing in U.S. real estate, hosted conferences in Istanbul and and we will leverage this to target core- Muscat to discuss partnership and plus opportunities in residential and investment opportunities that support commercial properties across Europe. the growth of private and family- owned businesses. Investcorp also, and On the Hedge Funds side of the once again, hosted a large group of business, we recently launched three

The Review | May 2016 4

Guest Feature A Time of Change: Saudi Arabia Vision 2030

audi Arabia made a bold and sources of revenue, heralding a new era The Review sat down with Investcorp’s ambitious statement in April of growth for the Kingdom. Head of Placement & Relationship 2016 when it announced details Management, Tim Mattar, to talk about S Central to the transformation plan is an of its Vision 2030. The plan will see the changes happening in Saudi Arabia (‘IPO’) of Saudi significant change across a range of and what this means for investors. Aramco. Saudi Arabia has said that sectors as the Kingdom diversifies its by selling just 5% of Aramco that it 1. How significant a moment economy, ending its dependence on can raise upwards of $2 trillion. These is this for Investcorp in Saudi the world’s thirst for oil. In a series of funds would then be used to seed the Arabia? What does it mean for interviews, Saudi Deputy Crown Prince Kingdom’s first , your strategy in the Kingdom? Mohammed bin Salman explained how which, if managed prudently, should the country would rationalise subsidies This is a hugely important moment for result in more sustainable investing on and , privatise Saudi Arabia and we firmly believe that the part of Saudi Arabia, delivering state-owned assets and establish new it will enhance the Kingdom’s long- stable returns over the decades ahead.

The Review | May 2016 5

Guest Feature

Investcorp’s Head of Placement and Relationship Management, on transformations in Saudi and positive momentum the market

term growth potential. From Investcorp’s perspective, we see there being two fronts to what it means for our investment strategy. Firstly, the creation of what could be the world’s largest sovereign wealth fund means that Saudi Arabia will be looking to deploy more capital in markets around the world. For nearly 35 years, Investcorp has acted as a bridge between investors in the Gulf and investment opportunities in the West, which means we are ideally placed to facilitate this flow of capital from Saudi Arabia into Europe and the United States. The second front is the reverse. As part of the Vision 2030 Plan, Saudi Tim Mattar Arabia wants to diversify its economy and increase foreign investment in the jobs, a larger consumer class and a we can provide operational support as Kingdom. We have been investing in healthier economy overall – this can well as financial support. As such, we Saudi Arabia for a long time and Vision only be a good thing for our portfolio will certainly look at opportunities in 2030 will mean more opportunities for companies and the types of companies in businesses that support these sectors us to partner with the government and which we invest. – as we did when we invested in NDT private businesses that are looking to Corrosion Control Services – but I don’t Meanwhile, Saudi Arabia is also actively attract from outside the envisage us being a significant player working towards increasing the number country. within these sectors, which tend to of companies listed on its exchange, consist of larger companies. 2. How bullish are you about the Tadawul, from the 160 or so we have investment opportunities in today to somewhere towards the 1000 5. Are there any other sectors that Saudi Arabia following this mark. For our portfolio companies, an you think will benefit from the announcement? IPO is very often an attractive way to reforms and how will Investcorp We were bullish before this fund growth so this encouragement from respond? the Saudi government is a particularly announcement and we are even more We expect we will see the government interesting development. so now. The Saudi government has said focus on encouraging investment in it wants to encourage the growth of the 4. The defence, mining and sectors such as healthcare, education, private sector and for it to contribute renewable energy sectors were business services and logistics. These much more to the overall economy. This highlighted as key sectors for sectors are critical to any economy is exactly the right strategy for Saudi the future of Saudi Arabia. Is and, typically, the private sector can Arabia’s future and we are confident that Investcorp planning to increase its significantly improve efficiencies. So Investcorp can play a key role in making activity within these sectors? naturally, we will be looking very closely it a success. at these types of sectors. These are not typical sectors that 3. How will Vision 2030 affect Investcorp invests in. We are structured Investcorp’s portfolio companies? in such a way that we add the most A stronger private sector means more value to mid-sized companies, where

The Review | May 2016 6

Investcorp’s New Strategy Investcorp announces strategy for next phase of growth

A new strategic direction to double over the medium term

The Review | May 2016 7

Investcorp’s New Strategy

n November 2015, Investcorp and we owe a great deal to his years of unveiled a new strategic direction dedicated service to the Firm. for the Firm at its annual Investors’ I “Investcorp has a solid brand, established Conference in . In a speech to over time thanks to the hard work of our investors and shareholders, Mohammed world-class professionals. This strategy Al Ardhi, Executive Chairman of will guide Investcorp through its next Investcorp, outlined details of the plan phase of growth. and said that Investcorp is aiming to increase its Assets under Management “In order for Investcorp to reach its (‘AUM’) by more than 100% over ambitious targets, our priority is to add the medium-term. Al Ardhi said that carefully selected services under the relationships with its investors and Investcorp will expand its product set, umbrella of our brand while striking the shareholders. In the Gulf, an important invest in people and it will not lose sight best balance between minimizing risk part of this is being as close to its of the Firm’s commitment to delivering and growing profit.” investors as possible. Investcorp recently the highest levels of client service. As By innovating its product set, Investcorp opened an office in , which builds Investcorp grows its AUM, the Firm will enable investors to access new on the Firm’s existing presence in will help its clients to grow their wealth opportunities, Bahrain, and . in a disciplined way whilst seeking to enhancing their ability to construct effectively manage their risk. diversified portfolios across multiple Addressing the audience, Al Ardhi said, markets with the objective of achieving “Many of our client relationships are as attractive returns. Investcorp will old as this Firm and through our proven leverage and maximize the huge depth ability over 33 years, we’ve shown that we of skills, relationships, resources and are as relevant to today’s new generation market knowledge that already exist of investors as we were when the Firm around the Firm, reinforcing its role as was founded by my predecessor Nemir the region’s bridge between the Gulf Kirdar in 1982. It is with the deepest and international markets. At the same respect that I thank Nemir for leading time, Investcorp will remain committed this company for over three decades, to maintaining and building very close

The Review | May 2016 8

Corporate Investments

The acquisition of $180 Million Office Building in Washington, D.C.

The Review | May 2016 9

Real Estate

nvestcorp completed the acquisition activity in core-plus, yield-oriented of a Class A office building in properties throughout the U.S.” Washington, D.C. for approximately I Investcorp purchased the property $180 million. This acquisition is with its joint venture partner, consistent with Investcorp’s recent track ScanlanKemperBard. record of acquiring top-quality, cash flowing properties in the U.S. and also represents the first acquisition under a The fully-leased new initiative focused on core-quality, long-term hold assets in key gateway office building markets. is in the heart of 733 10th Street (the ‘Property’), is a 170,813 sq. ft., 100% occupied, luxury Washington, D.C.’s office building located in the heart of Washington, D.C.’s East End office East End submarket, in close proximity to high- end retail stores, premium hotels and restaurants, two major Metro Stations and well-known sports and entertainment venues. Brian Kelley Brian Kelley, Principal, Real Estate Investment at Investcorp, said, “The 733 10th Street property is a stable, prime asset offering what we believe to be resilient, long-term value in combination with attractive current yields. We are actively seeking additional core-quality, stable properties like 733 10th Street in a handful of major gateway markets to supplement our ongoing investment

The Review | May 2016 10

Real Estate

Five New Residential Properties in Minneapolis and Boca Raton nvestcorp bought five residential housing facilities in the nearby area. metropolitan areas with strong market properties in the metropolitan The residential properties located in the fundamentals including solid rent growth I areas of Boca Raton, Florida suburbs of Minneapolis, Meanwhile, and high occupancy rates. We believe and Minneapolis, Minnesota for the Minneapolis portfolio comprises two the unique Boca Raton properties serve approximately $220 million. The multifamily apartment buildings with a growing student population in the acquisitions are consistent with 854 units and an average occupancy area, and the Minneapolis multifamily Investcorp’s strategy to invest in rate of 95 percent. Minneapolis has the properties have significant upside desirable, high quality properties located lowest unemployment rate in the U.S. at potential associated with exterior and in high demand markets providing 2.9%. interior upgrades.” attractive cash yields. “As the home ownership rate in the U.S. In Boca Raton, we have acquired continues to decline, rental properties three student housing properties, with are in high demand,” said Herb 892 beds and a 98 percent occupancy Myers, Managing Director, Real Estate rate, these properties are the only Investment at Investcorp. “All five of off-campus, purpose-built, student these properties are located in major

The Review | May 2016 11

Real Estate

$400 Million Office and Industrial Portfolio Investcorp adds $400 million Office and

Industrial Portfolio in the major U.S. markets Babak Sultani of Atlanta, Boston and San Francisco

nvestcorp has acquired a portfolio of capital of the Southeast, Atlanta boasts occupied with strong, stable cash flows office and industrial properties in the some of the highest job and population and diversified tenant bases, and thus are I metropolitan areas of Atlanta, San growth projections in the country. The well aligned with our investment strategy Francisco and Boston for approximately remaining properties are located in the of working with local operating partners $400 million. These acquisitions are high-performing sub-markets of San to add value to properties that already consistent with Investcorp’s strategy to Francisco and Boston, which benefit provide an attractive current yield.” invest in well-occupied properties with from strong technology, biotechnology, Investcorp partnered with several local healthy cash flows located in major U.S. and healthcare driven office demand. and regional operating partners to markets displaying strong economic Babak Sultani, Principal, Real Estate acquire the properties. The properties fundamentals and employment growth. Investment at Investcorp, said, “Atlanta, acquired total more than 5.5 million The entire industrial portfolio and one of San Francisco, and Boston are top square feet with an average occupancy the three office properties are located in business destinations with some of the rate of approximately 85 percent. the greater Atlanta area, and should be most attractive job and rental growth Investcorp plans to add value to the set to benefit from its highly diversified stories of recent years. All of the properties through upgrades, renovations and growing economy. As the business properties in this portfolio are well- and capital investment.

The Review | May 2016 12

Corporate Investment The Wrench Group A leading provider of air conditioning, plumbing and other essential home maintenance and repair services in the United States nvestcorp successfully acquired The Wrench Group, which was I formerly controlled by Alpine Investors, Skylight Capital, and Wrench management. The Wrench Group provides essential home maintenance and repair services, including heating, ventilation and air conditioning, plumbing and electrical services.

The Company operates in a large and David Tayeh fragmented $200 billion market and has demonstrated consistent growth through in its current regions, and strategically all economic cycles. The Wrench Group expanding into attractive markets.” currently serves over 140,000 customers throughout the Atlanta, Dallas, Houston As part of the transaction, management and Phoenix markets, four of the fastest will continue in their current roles with growing metropolitan areas in the the Company and retain a meaningful United States. It is marketed regionally interest in Wrench. Collin Hathaway, through four prominent brands: Coolray, Managing Partner of Skylight Capital Berkeys, Abacus and Parker & Sons. and Chairman of Wrench said, “We With approximately $150 million in spent the past five years identifying revenue for 2015, The Wrench Group is and partnering with the best regional positioned as a leading provider of home companies, leaders and cultures in the services in each of its markets due to non-discretionary home service space. high brand recognition and commitment Investcorp shares our commitment to exceptional customer service. We to our team, our customers and our believe that the Company is poised for industry and we are thrilled to have continued growth in existing and new them as a partner and resource.” markets. Graham Weaver, Founder and Partner “Investcorp is excited to partner with of Alpine Investors added: “The The Wrench Group’s outstanding management team at Wrench has built management team. The team has a world class, durable company that distinguished itself by achieving continues to provide incredible service substantial growth in each of the and value to thousands of customers Company’s markets while providing throughout the U.S. We are honored superior customer service,” said to have Investcorp, a first rate and David Tayeh, Head of Corporate experienced , as a partner to Investment for North America at help the Company realize its potential.” Investcorp. “We plan to support the Company in continuing to build upon its current successes by capitalizing on best practices across the enterprise, continuing the strong organic growth

The Review | May 2016 13

Corporate Investment Cybersecurity service provider SecureLink Established platform to develop a leading IT security solutions company in Europe

ast year, Investcorp purchased as well as managed security services as we seek to implement an accelerated SecureLink Group NV, whose (‘MSS’), helping its customers to growth strategy, both organically and L management and initial founders handle complex security challenges through add-on acquisitions.” will reinvest and hold a meaningful and requirements, mitigating risk Marco Barkmeijer, Chief Executive minority position in the Company as exposure and delivering a reliable secure Officer, SecureLink, added: “Ever since part of the transaction. infrastructure that offers customers our formation, SecureLink has been peace of mind. Headquartered in the Founded in 2003, SecureLink is a focused on delivering exceptional client Netherlands and Belgium and active in leading cybersecurity infrastructure service in the area of cybersecurity, a the Benelux region, Investcorp believes and managed services provider, focus that has enabled us to become a that SecureLink is ideally positioned to offering integrated security solutions leading cybersecurity infrastructure and expand its geographical footprint and for corporates and institutions in the managed services provider in our home become a leading pan-European player. upper mid-market. The Company markets. Through continued organic provides advanced security solutions Carsten Hagenbucher, Managing growth as well as acquisitions we now Director in Investcorp’s Corporate stand ready to take SecureLink to the Investment team in London, said: next level. In Investcorp, we believe we “Investcorp has a long investment track have found the right partner for the next record in security technology on both part of our journey, and look forward to sides of the Atlantic. In SecureLink, we benefiting from their industry insights, have found a formidable and customer- global network and growth enabling oriented cybersecurity solutions provider, capital base to help us become the a platform from which we seek to drive leading pan-European player.” a pan-European expansion strategy. We are impressed by SecureLink’s entrepreneurial management team and Carsten Hagenbucher we look forward to partnering with them

The Review | May 2016 14

Corporate Investment Bindawood Investcorp partners with the Bindawood family and acquires a minority stake in one of the leading supermarket and hypermarket chains in Saudi Arabia

7,000 people. the Company. We spent a long time evaluating the options available to us The Bindawood brand is focused on the and we are looking forward to beginning mid-range customer segment and the this new chapter in our history with pilgrims in the holy cities. Meanwhile, Investcorp as our partner.” Danube appeals to higher-end customers by stocking higher-price point products. Bindawood Holding is Investcorp’s sixth portfolio company in Saudi Arabia Yasser Bajsair, Managing Director at and follows the Firm’s acquisition in Investcorp in the Kingdom of Saudi July 2015 of a majority stake in NDT Arabia, said, “Consumer spending in Corrosion Control Services, Saudi Yasser Bajsair Saudi Arabia has strongly benefited Arabia’s largest industrial testing services from economic and population growth company. Investcorp’s other investments nvestcorp acquired a minority stake over the last five years. This trend is in Saudi Arabia include Leejam, the in one of Saudi Arabia’s leading expected to continue going forward, owner and operator of the leading fitness supermarket and hypermarket and we believe that the Company is I chain “Fitness Time”; Theeb, the leading groups, Bindawood Holding. ideally positioned to capture this growth. car rental business; Al Yusr Industrial There is a very strong management Since its inception over 50 years Contracting Company (AYTB), a team in place and we are eager to lend ago, Bindawood has grown from a leading provider of industrial services our expertise to help bring this exciting small trading business to one of the outsourcing solutions; and L’azurde, brand to even more consumers across the leading retailers in Saudi Arabia, and a leading designer, manufacturer and Kingdom.” it currently manages two key brands distributor of gold jewellery. - Bindawood and Danube - across 40 Dr. Abdulrazzaq Bindawood, Chairman hypermarkets and supermarkets in major of the Board of Bindawood Holding, Saudi Arabian cities, including Makkah, said, “Investcorp brings valuable Medina, Jeddah, Riyadh and Khobar. expertise to help us structure our growth Today, the Group employs more than across Saudi Arabia and institutionalize

the market by upgrading its technology platform using innovative, customer- Sale of Veritext completed friendly technologies, streamlining the deposition process, and enhancing arlier in 2016, Investcorp facilities, highly skilled court reporters, delivery flexibility. Proprietary video, sold VText Holdings, Inc. advanced technology and unparalleled advanced mobile apps, and flexible E (“Veritext” or the “Company”) client service. remote services combined with to firm Pamplona Capital During Investcorp’s ownership, Veritext unmatched security ensure that Veritext Management. doubled its sales force, completed 16 clients have the best tools available to Founded in 1997, Veritext is the leader in strategic add-on acquisitions, opened meet their complex needs. deposition and litigation support services. two offices in new markets, invested in Veritext provides law firms, Fortune 500 technology and marketing, and built a corporations and regulatory agencies robust corporate structure. Investcorp with national coverage, state-of-the-art helped Veritext differentiate itself in

The Review | May 2016 15

Events and Conferences

Discussion in Oman on investing in family businesses

nvestcorp hosted a conference continue building upon this unparalleled in Muscat to discuss investment platform in the Gulf. When you combine I opportunities that can support the this international experience with our sustainable growth of family businesses deep roots in the regional markets, it ...more in throughout the Gulf. positions us as the ideal partner for Omani businesses that are looking to The conference, ‘Investing in Family Muscat maximise their full potential.” Businesses in the Gulf ’, was attended In 2016, The Executive Chairman by over 100 guests, including Harsh Shethia, Managing Director at spoke at the 11th annual Harvard investment professionals who shared Investcorp for Oman said, “Investcorp is Arab World Conference, in Muscat, their insights, and a number of family one of the oldest and most experienced Oman, about the importance of business executives who discussed their investors in family businesses globally. In collaboration, saying, “While it is experiences of growing alongside a the last seven years we have brought our true that one individual can come private equity partner. expertise to the Gulf, deploying over $1.2 up with an idea, it is more often billion of equity in regional businesses. Mohammed Al Ardhi said in his opening the interchange and collaboration Investcorp has also been active in remarks, “With the global economy between different minds that enables realizing value from its investments, with currently going through a period of an idea to take wing.” exit proceeds of $7 billion in the last significant volatility and with oil prices at five years from companies and property In Oman as well, Al Ardhi attended their lowest for a decade, it is critical that investments.” the Sovereign and Pension Funds family businesses in this region continue Conference, where he spoke about to innovate and diversify.” Also speaking at the event were the current state of the investment Mohammed Al-Shroogi, Co-Chief “Having the right partnerships and industry and global markets and Executive Officer of Investcorp; Fahad networks is also crucial to business success discussed the changes that face Al Haqbani Co-founder and Chief and given the current environment, this the industry, including the rise Executive Officer of Fitness Time and is more important than ever. Investcorp of impact investing through the Wassim Hammoude, Principal, Corporate has been investing in family businesses growing number of Millennials in the Investment MENA at Investcorp. around the world for over thirty years workforce. and is on an ambitious growth journey to

The Review | May 2016 16

Events and Conferences Investcorp Partners Conference in Turkey n March 2016, Investcorp hosted a conference in Istanbul to discuss I partnership opportunities that support the growth of private and family- owned businesses in Turkey. The conference, called the ‘Investcorp Partners Meeting’, was attended by over 50 guests and held at the Çiraĝan­ Palace Kempinski Istanbul. Speaking at the event were investment professionals who shared knowledge on investment trends and thought leadership in the private equity industry. Also discussed was the significance of strategic partnerships in boosting the growth of family businesses, through the provision of financial capital, as well as operational and portfolio management expertise. Investcorp’s Executive Chairman, Mohammed Al Ardhi said, “Since 2007, we have made investments in four different companies, and have succeeded sector, and we remain excited about the Both Mohammed Al Shroogi and Rishi in building a strong network and country’s potential for growth.” Kapoor, Co-Chief Executive Officers at Investcorp were amongst the speakers at understanding of the Turkish market. Also amongst the topics discussed at the the event; as well as Savio Tung, Senior Turkey is one of the largest economies conference were the economic outlook Advisor at Investcorp. in the MENA region, with strong of the Gulf, Europe and US, as well as market fundamentals and a solid private best practices in corporate investments.

Rishi Kapoor gives keynote address at Oman Oil & Gas Forum

n February 25, 2016, Rishi economic outlook and its interplay with OPAL is a society for oil and gas Kapoor gave a keynote address crude. companies in Oman with nearly 370 to the guests of Oman Society members consisting of major oil O Industry leaders were present to discuss For Petroleum Service (OPAL) inaugural producers, contractors and services and find solutions to the impact of falling Oil & Gas Forum, on the global providers. oil prices on Oman’s economy and jobs.

The Review | May 2016 17

Events and Conferences North America CEOs Conference in Miami n February 7, 2016, CEOs of Investcorp’s portfolio companies O attended a two-day event in Miami, hosted by Investcorp’s Corporate Investment North America team led by David Tayeh. Mohammed Al Ardhi, the Executive Chairman, commenced the evening with a speech about Investcorp’s investment philosophy and the strong partnerships it forms through working together with CEOs and management teams. David Gergen, senior political analyst at CNN and a former adviser to four US presidents, joined as a guest speaker and the speeches were followed by a dinner. The second day of the conference took off with interactive panel discussions on innovation and the use of technology, human resources and talent management, and creating growth.

Speech at London Business School n November 2015, Mohammed Al Ardhi, Executive Chairman of I Investcorp spoke at the London Business School 14th Annual Middle East Conference, in London, addressing the audience about leadership in various forms, from the position of individuals as well as the examples that can be set by communities and corporations. He also discussed the importance of fostering a dynamic culture of entrepreneurship and the influence of educational experiences in building a solid foundation for future leaders.

The Review | May 2016 18

Investcorp Leadership Program Leadership program for young Gulf business leaders at University of Oxford

Group Photo at Investcorp Building, St. Anthony’s College

arlier in 2016, Investcorp designed by Investcorp and Oxford 41 young organized its annual Investcorp Saïd to equip the next generation of business leaders E Leadership Program at the Arab professionals with the leadership, University of Oxford’s Saïd Business innovation and management skills from the GCC School, between 29 March and 1 April necessary to succeed against the 2016. 41 aspiring young business leaders increasingly challenging dynamics of the attended the four- from the GCC attended the four-day world today. Attendees were provided program, which is part of Investcorp’s with a platform to debate some of the day program on-going commitment to further develop most critical trends and issues shaping human capital in the Gulf by providing a business, with distinguished faculty platform to foster knowledge sharing and members and globally recognized promote understanding of critical issues experts. influencing the global economy and Mohammed Al-Ardhi, Executive business world. Chairman of Investcorp, said, “Since This year’s edition of the Investcorp its inception Investcorp has acted as Leadership Program was specifically a bridge between the Gulf and the

The Review | May 2016 19

Investcorp Leadership Program

West. This role is more than creating strengthen their leadership and business professionals and we are proud to have investment opportunities and we have skills. It is this generation that will created a developmental path for them a responsibility to support the next lead Middle Eastern economies and to enhance their capabilities and enrich generation of Arab business leaders societies to the next stages of prosperity. their knowledge.” by providing them with the tools to We see great potential in these young

Group Photo at Balliol College

The Review | May 2016 20

Hedge Funds Investcorp Enhances Seeding Business

nvestcorp has enhanced its hedge Redwood Capital Management, founded fund platform by adding two strategic Nut Tree in June 2015. He is joined I relationships to its Hedge Fund by team members with investing and Seeding Business – Kinneret Group operations experience at industry leading and Nut Tree Capital Management. firms including KKR, GLG, Goldman Kinneret Group (“Kinneret”) takes Sachs, and Scout Capital. Nut Tree a purely quantitative approach to pursues a fundamental credit strategy by hedge fund investing, while Nut Tree investing in both stressed and distressed Capital Management (“Nut Tree”) is an opportunities across North America. alternative credit investment manager. The fund seeks investment opportunities Lionel Erdely Both funds are based in New York. often defined by complex, potentially undervalued situations at mid-market Lionel Erdely, Head and Chief companies. Investment Officer of Hedge Funds at Investcorp, said, “We set up the Seeding Discussing the two managers, Lionel Business in 2004 in order to provide Erdely said, “Although Investcorp’s investors with access to select investment hedge fund team has a long history talent backed by an institutional platform. investing in quantitative-oriented While Kinneret and Nut Tree may differ hedge funds, Kinneret is the team’s in style, both are hugely experienced and first strategic relationship with such a serve as great additions to Investcorp’s manager. In recognition of the growing hedge fund platform.” investor demand within the industry for differentiated and uncorrelated Kinneret is run by Mony Rueven, a liquid strategies, we are pleased to have 33-year industry veteran, with 12 years established this relationship.” spent at the D.E. Shaw Group, widely recognized as one of the pioneers and “Nut Tree’s recent launch comes at an most respected quantitative investment opportune time for distressed credit firms in the hedge fund industry. investing. We believe its available dry Mr. Rueven is joined by other senior powder to invest leaves it well-positioned colleagues from D.E. Shaw, which include to identify attractive investment Dr. Alexander Wang and J. Andrew opportunities and we are looking forward Lindholm. Kinneret seeks to identify long to working with the team.” and securities within the S&P 500 using a differentiated systematic approach that aims for consistent , low net market exposure and minimal correlation to market and peer group benchmarks. Jed Nussbaum, an experienced credit investor who was most recently a Partner at multi-billion dollar credit hedge fund

The Review | May 2016 21

Hedge Funds Alternative Beta: A discussion with Rebecca Hellerstein

or this edition of the Review, we macroeconomic and market worked intensively to create proprietary sat down with Rebecca Hellerstein, environments. It also has a risk/return quantitative and qualitative research F our Head of Cross-Asset profile that is similar to that of a typical that enables us to produce unique factor Investments, to talk about Investcorp’s diversified hedge-fund portfolio with articulation and to dynamically allocate approach to Alternative Beta investing. greater liquidity, transparency, and a to alternative beta strategies within a more efficient cost structure. “cycle-aware” framework. Cycle-aware Q: What can you tell us about allocations accounted for about 40% of alternative beta risk premiums? Q: What would you say about the our funds’ return since going live in June benefits of investing in alternative A: Alternative beta risk premiums of last year, in a challenging macro and beta? are a source of uncorrelated returns. markets environment. They are mainly supported by three A: Alternative beta investing, at its core, elements: a strong theoretical basis, a is a guiding philosophy to understand clear underlying economic or behavioral sources of return at the deepest, most rationale, and a robust empirical granular level. The increasing adoption validation. They are distinct from of this new paradigm by institutional “alpha” because of their transparency, investors has stemmed from a variety of liquidity, scalability, and accessibility motivations. These can be summarized and represent the new “building blocks” in four points: firstly, the continued of asset allocation. Unlike traditional evolution in our understanding of betas, alternative beta strategies reflect returns; secondly, the reduction of more nuanced sources of return where barriers to access these new “building significant value can be added through blocks”; thirdly, the quest for truly research, implementation, and trading uncorrelated investments; and, lastly, the strategy decisions. desire for lower fees, better liquidity, and increased transparency. Q: What is Investcorp’s strategy for investing in alternative beta? Q: In your view, why is now a good time to invest in this strategy? A: We invest in a variety of alternative beta risk premiums such as Value, Carry A: We are potentially in a secular long- and Momentum, across major asset term environment of low market returns. classes, such as equities, fixed income, Coupled with the recent volatility in the FX and . The primary macro environment and markets, we see characteristic of our alternative beta an increase in the need for both new portfolios is a broadly diversified, sources of return and true diversification multi-strategy, multi-asset, long/short in an institutional portfolio. investment approach with zero to low Q: What is Investcorp’s edge in net market exposure to traditional alternative beta? asset classes. Our dynamic portfolio management adjusts exposures over A: We have a highly experienced a 6- to 12-month horizon to reflect team with Cross-Asset and Alternative current trends as well as anticipated Risk Premia expertise. This team has

The Review | May 2016 22

New Joiners & Global Macro Outlook by Rebecca Hellerstein Investcorp Hires Neil Hasson For Entry Into European Real Estate

nvestcorp appointed Neil Hasson as Estate Investment, Jonathan Dracos, MBA with distinction from The Warton a Managing Director to spearhead based in New York. School, University of Pennsylvania. its European real estate investment I Mr. Hasson has nearly three decades initiative. Mr. Hasson joins as the Firm of experience in real estate investment. targets the European property sector in He was previously a Senior Managing line with its strategy to diversify its range Director at Macquarie Group, of investment products, marking another responsible for the firm’s European significant step in driving the Firm’s real estate lending business. Prior to future growth. this, Mr. Hasson spent seven years at Building on the track record of the Citi Property Investors, where he was Firm’s U.S. team, Mr. Hasson is Head of Europe and Chief Investment responsible for developing Investcorp’s Officer of CPI Capital Partners Europe, European real estate investment a €1.15 billion pan-European real estate Neil Hasson business with an initial focus on core- fund. He started his career at Goldman, plus opportunities in residential and Sachs & Co., followed by four years at commercial properties across the United Donaldson Lufkin & Jenrette where he Kingdom, Germany, France, Italy and was a Managing Director. A University Spain. He is now based in London and of Cape Town graduate in Electrical reports to Investcorp’s Head of Real Engineering, Mr. Hasson holds an Global macro outlook lobal markets have survived darkened for Japan, where the pace of remarkable bouts of volatility economic activity continues to falter; G during the past three months. consensus expectations took a major The turbulence occurred against a step downward in the first quarter. This backdrop of widespread anxiety about mixed economic picture contrasts with the pace of global growth following the ongoing deceleration of inflation in the Fed’s December liftoff, premised most developing markets (‘DM’), a trend largely on concerns that the central that has become increasingly apparent. bank had acted prematurely. Consensus This puts us on the cusp of a potential expectations for global growth have transition in the business cycle, and, as a Rebecca Hellerstein stabilized in the wake of January’s noisy result, in markets. downside surprises, reflecting a favorable In fact, while concerns about economic consolidation of economic momentum conditions have been somewhat in the U.S., Europe and, to some extent, overwrought, the combination of less- China. That said, the outlook has

The Review | May 2016 23

Global Macro Outlook by Rebecca Hellerstein

Emerging Markets. Growth prospects Average Equity Returns by Macro Environment for this segment have picked up amid an improved outlook for oil prices. A strong  dollar and tighter external financial conditions will continue to be a drag, especially for Latin American economies; most Asian economies, meanwhile,  remain in an extended inventory cycle, though that may slowly be coming to an end. Geopolitical risks will likely play a greater role in MENA economies over the  next few years, which may buoy oil prices and EM economies more generally. China. In early January, the People’s - Bank of China (‘PBoC’) caught many Inationary Reationary Stagationary Disinationary investors off-guard by cutting the value of (+/+) (+/-) (-/+) (-/-) the yuan at its daily fixing. This plunged markets into yet another volatility than-robust growth and a slowing pace as the temporary effects of lower oil episode, with investors fearing the worst of price increases has stirred fears that a prices and a higher dollar fade. Under for the world’s second largest economy. disinflationary macro environment may the circumstances, it is a good bet that Assets linked to Chinese growth were devolve into something more unpleasant. inflation will be moving higher. pummeled as investors priced in a hard Some participants were apparently Area. The region’s modest landing, massive currency devaluation, spooked by the prospect that the global recovery has continued to gain traction and a fresh bout of global deflationary economy is heading toward stagflation, since our last update, driven by lower pressures. But as the following chart where inflation accelerates while growth energy prices, unusually accommodative from Goldman Sachs shows, a yawning deteriorates. Such a combination monetary policies, and a weaker gap opened up between Chinese has historically been associated with currency. That said, we believe the economic fundamentals and the markets’ significant drawdowns in equities and challenging environment for European discounting of growth (as proxied by a other risk assets. banks will persist; business models are cross-asset basket of instruments sensitive Regional Outlook fundamentally challenged by negative to Chinese economic conditions). The interest rates and a more arduous disparity was exacerbated by a lack of United States. First quarter economic regulatory regime, with increasingly transparency regarding the PBoC agenda releases bolstered our (and others’) stringent capital requirements. Despite and investor doubts about the veracity of confidence in the underlying strength some recent downside surprises in Chinese government statistics. of the U.S. economy. The labor market German sentiment data, positive trade has been a standout performer, marked conditions, further monetary easing and, by strong payroll gains and accelerating perhaps, some fiscal spending should wage growth. Despite the recent keep the economic rebound on track. pullback, the dollar remains a headwind, though more for earnings than the real Japan. Japan’s economy has until economy. recently been supported by a combination of accommodative The Fed’s decision to raise interest rates , lower prices, in December stemmed largely from its and a weaker currency. However, all focus on measures that reflect the health have recently reversed course, leading of the domestic economy—most notably, to diminishing consensus expectations above-trend growth in private domestic regarding the country’s macro outlook. demand, labor market tightening, and Worse still, last quarter’s unexpected evidence of a Phillips curve in play in strengthening of the yen threatens to inflation dynamics. Core inflation had become a major headwind for the rest or begun to pick up earlier this year, before the year, not least because it reflects the the second leg down in oil prices, and BoJ’s complete loss of credibility among has resumed its upward momentum. market participants, owing to its failed Evidence of diminishing slack in the negative policy. labor market is again becoming apparent

The Review | May 2016 INVESTCORP BANK B.S.C. Investcorp House P.O. Box 5340 Kingdom of Bahrain Telephone: +973 17 532 000 [email protected]

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