Tuesday, November 20, 2007

Dubai fund manager to invest in India

Baer Capital Partners, a funds management company based in Dubai, said it planned to raise $500 million to invest in real estate and infrastructure in India, the world's fastestgrowing major economy after China.

The firm will begin investing in India in the second quarter of next year after tapping investors outside India in early 2008, Alok Sama, president of Baer Capital, said during an interview here last week.

Baer Capital joins JPMorgan Chase, 3i Group, Blackstone Group and Citigroup in planning to invest funds from overseas in Indian companies building roads, ports and electricity plants.

"The experience of China would suggest 10 percent growth can be sustained for periods longer than believed," Sama said.

Sama controls Baer Capital along with Michael Baer, a former board member of Julius Baer Holding, a Swiss private bank, and Brij Raj Singh, a former managing director at Merrill Lynch.

Baer Capital plans initial investments in companies that provide infrastructure services, including contractors and suppliers of equipment like cranes and earthmovers.

"It's critical for India's economic development that infrastructure is increased sharply," said Pauli Laursen, an investment manager at Sydinvest Asset Management at Aabenraa, Denmark, who holds shares of Indian companies including Larsen & Toubro and Bharat Heavy Electricals. "India needs money from all over for its infrastructure."

Baer Capital has already invested about a third of a $200 million private equity fund in power transmission services and an art auction house. Sama, a former managing director at Morgan Stanley, set up its investment banking operations in India. He said that the private equity fund would also invest in a developer, infrastructure services and a software testing company.

Investor appetite for companies in the power industry has also increased, amid growing demand for electricity. The top three performers on the Sensitive index of the Bombay Stock Exchange this year are Reliance Energy, an electricity generator and distributor; Larsen & Toubro, an engineering company; and Bharat Heavy Electricals, a maker of power-generating equipment like boilers, generators and turbines.

Sama said the subprime loan crisis crimping global credit markets would not stop the flow of global funds into India.

"Fund-raising will probably slow down, but at the margin India should experience a disproportionate share of flows into emerging markets," Sama said.

HSBC creating a fund of real estate funds

The asset management unit of HSBC Holdings is raising the first fund of property funds for British savers, aiming to benefit from gains in Asia and Continental Europe.

The HSBC Open Global Property Fund will buy shares in 10 real estate funds that own stocks, buildings or both, said Guy Morrell of HSBC Investments, who designed the open-ended mutual fund and will manage it. HSBC Investments began marketing the fund Monday and it is to start operating Nov. 26.

The fund will initially allocate 50 percent of its assets to Continental Europe and 30 percent to Asia, with the remaining 20 percent in Britain and the United States, Morrell said during an interview Friday. Investors are focusing on overseas real estate because the British market may stagnate after generating returns of at least 18 percent in the past three years.

Juliet Schooling, head of research at Chelsea Financial Services, said, "If you are looking for property exposure, this wouldn't be a bad place to look." While the fund offers flexibility and the sell-off in real estate securities may offer value for funds that invest in them, "I question how popular it will be at this stage," she said.

The fund is the 36th set up by asset management firms in the past three years to tap the £6.72 billion, or $13.8 billion, that British savers have channeled into property mutual funds since the start of 2005, according to figures compiled by Morningstar and the Investment Management Association.

Since March, British net real estate mutual fund sales have slumped 85 percent to £69.1 million on concern that British commercial property values would decline.

"The rest of Europe and Asia offer stronger economic fundamentals, more attractive property prices and a wider diversity," Morrell said. For the British and U.S. markets, he said he favored funds focused on real estate stocks, where some shares "have taken a hammering from indiscriminate selling." - Simon Packard


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