Dubai – Mubasher: Dubai-based Abraaj Group has recently been roiled in a series of problems over money misuse and irregularities at its healthcare fund. Now reports show that the misuse may have extended to other branches in the Middle East’s largest investment companies.
Two separate examinations were conducted in this alleged misuse of funds have indicated irregularities in Abraaj’s $1 billion healthcare fund, informed sources told Bloomberg.
In February, Abraaj’s founder Arif Naqvi ceded control of the company’s asset management unit, while new managers vowed to introduce stronger internal controls. Despite that, the investment firm has struggled under concerns over liquidity and investor ire, which results in the sale of some of the firm’s assets as well as several job cuts.
Earlier this year, the Wall Street Journal (WSJ) reported that four of Abraaj’s investors had appointed Ankura Consulting Group to investigate what had happened to the money they had invested in Abraaj’s health fund.
Ankura said it found “instances of irregularities in the healthcare fund, including the diversion of funds from that pool to other investments,” the news agency reported, citing the sources as saying.
Meanwhile, Deloitte, whose review is still underway, is reportedly in talks with the Dubai Financial Services Authority (DFSA) over its findings. The Dubai market regulator has yet to decide on a course of action, the people, whose names were not revealed, added.
A “discrepancy” between money Abraaj collected from investors and amounts it invested in the healthcare fund was due to “unforseen political and regulatory developments” in several markets, resulting in delays, Abraaj said.
It added that a deal with its clients allowed it to hold on to the cash until it could be deployed, noting that the unused capital was returned to investors at the end of December.
Abraaj previously said that it conducted an internal review by KPMG, which found all payments and receipts to be properly accounted for.
Since the announcement of the changes in the company’s management, governance and operating model, Abraaj’s leadership “has been focused on executing on the re-organisation of the business, engaging with all investors, and driving value in Abraaj’s portfolio companies across its operating markets”, the firm said in a statement.
Since the allegations came to light, the Abraaj Group has returned capital in a new global fund, temporarily suspended new investments, delayed an initial public offering (IPO) or sale of its North African hospitals business, and reduced around 15% of its total workforce.
Abraaj’s problems have “sent shock waves” across local dealmakers and contributed to halting private equity deals and fundraising in the region, Bloomberg reported, citing interviews with nearly a dozen financial industry executives who spoke on condition of anonymity because the sensitiveness of the matter.
“A further escalation in the influential firm’s problems could undermine Dubai’s reputation as a global financial hub and dampen overseas investors’ risk appetite by heightening concerns about a lack of transparency in the region,” the news agency added.
Earlier in May, Abraaj attempted to ease the concerns of its investors and biggest creditors over liquidity reports and said it was close to finding a buyer for a controlling stake in its fund management unit and disposing of its Pakistani utility, the sources added.
The informed people went on to say that Colony NorthStar, a private equity and real estate firm run by billionaire Tom Barrack, was a front-runner for taking over Abraaj’s asset management arm.
Abraaj manages around $14 billion in assets across the Middle East.