U.S. hedge fund D.E. Shaw sees chance in Gulf region

Date: Tuesday, September 15, 2009
Author: John Irish, Reuters

D.E. Shaw, the world's fourth largest hedge fund, is opening in Dubai to tap public and private opportunities in the world's largest oil exporting region and ease Gulf Arab investors moves into overseas markets.

"We wanted to be here because the region is home to many investors with deep regional knowledge and global reach," Trey Beck, a managing director of D. E. Shaw & Co told Reuters.

With some of world's biggest financial institutions caught in the global financial crisis, forcing them to deleverage and reduce international operations, a raft of international funds, private equity firms and investment banks are positioning themselves to access liquidity in the region.

Gulf Sovereign wealth funds and companies linked to them are also growing confidence in an imminent economic recovery pushing them to seek returns again on their investment to save for future generations.

In the past few weeks alone, Qatar's fund has helped rescue the owner of London's Canary Wharf office complex and said it would invest 7 billion euros ($10.2 billion) in the Porsche (PSHG_p.DE) and Volkswagen (VOWG.DE) deal.

D.E. Shaw has been active in the Gulf's fixed income market as governments look to boost infrastructure spending to shelter the economy from the global financial crisis and demand rises for high-rated emerging market debt.

It invested in notes including sovereign issues from Abu Dhabi and Qatar, the world's largest exporter of liquefied natural gas, and state-backed firms such as UAE property developer ALDR.AD.

It also previously participated in initial public offerings on the Nasdaq Dubai, but in the longer term is look at engaging more with the private sector.

"Whether any attractive opportunities will materialize in the short term is difficult to say," said Tony Hchaime, senior executive officer at D.E. Shaw & Co MENA. "We are looking across a range of asset classes, from equity to senior debt and anything in between," the former Lehman Brothers executive said.

Hedge fund returns rose for the sixth straight month in August putting the $1.4 trillion industry on track to record its best year in a decade after investors removed a record $152 billion in the fourth quarter, according to latest data.

D.E Shaw's office in the Dubai International Financial Center, a business center aimed at bridging financial markets between the East and West, is its 14th globally and will seek to bring its experience trading in the energy sector to the oil-reliant Gulf.

"These are large, capital-rich markets," said Beck, who joined Shaw in 1993. "They're obviously fueled in meaningful part by commodities, but there's increasing diversification."

Driven by a six-year oil boom, the Gulf is investing billions of dollars developing its infrastructure to diversify its economy away from the hydrocarbons sector. Saudi Arabia alone has said it will pump $400 billion to keep its economy ticking over, offering huge incentives for foreign firms eyeing the world's largest oil exporter.

"Our deal universe is fairly wide, ranging from around $15 million to investments in the hundreds of millions of dollars," Beck said. (By John Irish; Editing by Dan Lalor) ($1 = 0.6860 euro)