Buy Side Overview

Four years ago, EFG Hermes initiated a new strategy that would see it combine asset management and private equity into one platform to provide investors with an integrated portfolio of investment opportunities that stretched beyond our traditional MENA and frontier markets to include products that spanned the globe. We have grown the platform both horizontally – by adding new and unique products – and vertically – by seeking out new investors beyond the MENA region. At the end of 2018, total AUM for the combined platform stood at around USD 4.5 billion.

Overall, 2018 was a significant year for Buy-Side in that we were able to validate our strategy with the signing of a definitive agreement with institutional investors advised by J.P. Morgan Asset Management to sell Vortex Energy’s 49% stake in a 998 MW operational wind power portfolio managed and co-owned by EDPR. The exit was a testament to our ability to seamlessly manage the full investment cycle with a consortium of global investors. We identified the opportunity, structured the deal, brought in the investment and exited delivering good returns all within the context of a challenging year for global markets.

While we have exited our wind energy assets entirely, we are still firmly committed to continuing to invest in the global renewables space. Proceeds from the sale of Vortex Wind will be reinvested globally and we are currently looking into markets in the US and Canada. We also remain active in Vortex Solar, which owns 24 solar assets in the UK representing 365 MW of capacity. The solar portfolio continues to deliver in terms of both cash distribution and performance, and we have strengthened our operation on the ground in the UK.

The second key milestone for Private Equity this year was a significant Egypt-focused transaction that falls under our education pillar. In the second half of the year, we managed to close on a fund that is in the magnitude of USD 110 million, which stands as the largest private equity fund raised specifically for investments in Egypt in over a decade. What makes it even more impactful is that it’s dedicated to a sector that is in dire need of investment and development. Together with our partners, a best-in-class regional school operator, GEMS, we hope to make a strong impact in the industry and deliver attractive returns to our investors.

The closing on this fund also sends a clear signal to the market that EFG Hermes is committed to bringing investments back into Egypt in sectors that are critical to the growth and development of the Egyptian economy. In 2018, we acquired four schools with a student population of over 5,000 in the Cairo suburbs of Madinaty and Rehab, and in 2019 we look forward to pursuing multiple investment opportunities across the education sector with the help of GEMS.

On the Asset Management front, 2018 was a less eventful year characterized by volatility in regional capital markets and geopolitical turbulence that impacted asset managers across the board. Despite the challenging operating environment, we managed to maintain the business with all our funds continuing to deliver strong performances. At the end of 2018, total assets under management by our asset management activities stood at USD 2.1 billion in regional AUM and EGP 13 billion in Egypt AUM.

The Asset Management Division was also awarded a new mandate to manage a money market fund for Emirates NBD Egypt, further proof that we have the ability to offer a diversified portfolio of funds for an expanding investor base.

Our regional business continues to grow with Frontier Investment Management Partners Ltd. (FIM), a leading investment manager with experience in emerging and frontier markets, a business that we acquired 50% of in 2017. Last year, we launched a new fixed income strategy and successfully closed a new real estate investment strategy — both under our FIM partnership.

We look forward to a better outlook for capital markets in 2019 throughout the region. On the Asset Management side, there is some optimism that capital markets across the region are showing signs of resilience, and we are particularly positive about Egypt and Saudi Arabia. On the Private Equity side, we will continue to focus on growth in the educations space through our Egypt Education Fund and our partnership with GEMS, and we look forward to announcing new investments in renewable energy along the lines of Vortex in the near future. As for healthcare, the third pillar of our Private Equity investment strategy, we are actively looking for opportunities for our RX Healthcare platform and hope to conclude a transaction in 2019.

Karim Moussa,
Co-Chief Executive Officer, EFG Hermes Investment Bank